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Dividend policies of shariah-compliant and non-shariah-compliant firms: evidence from the MENA region

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  • Omar Farooq
  • Oumkeltoum Tbeur

Abstract

Do shariah-compliant firms pay higher dividends than other firms? Using data from the MENA (Morocco, Egypt, Saudi Arabia, UAE, Jordan, Kuwait, and Bahrain) region, this paper shows that shariah-compliant firms not only have higher payout ratios but also have higher likelihood to pay dividends than non-shariah-compliant firms during the period between 2005 and 2009. We argue that financial characteristics of shariah-compliant firms (i.e., low leverage, low account receivables, and low cash) are such that they pay higher dividends than their non-shariah-compliant counterparts. Furthermore, we also show that our results hold true in both legal regimes - the civil law countries and the common law countries.

Suggested Citation

  • Omar Farooq & Oumkeltoum Tbeur, 2013. "Dividend policies of shariah-compliant and non-shariah-compliant firms: evidence from the MENA region," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 6(2), pages 158-172.
    • Handle: RePEc:ids:ijecbr:v:6:y:2013:i:2:p:158-172
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    Citations

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    Cited by:

    1. Naz, Iram & Shah, Syed Muhammad Amir & Kutan, Ali M., 2017. "Do managers of sharia-compliant firms have distinctive financial styles?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 174-187.
    2. Ooi, Chai-Aun & Hooy, Chee-Wooi, 2022. "Muslim CEOs, risk-taking and firm performance," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    3. Diana Hashim Syarif & Sugeng Wahyudi & Irene Rini Demi Pangestuti, 2019. "Financial Constraints and Cost of Equity: Empirical Study of Shariah Compliant Firms in Indonesia," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 371-381, December.
    4. Pepis, Scott & de Jong, Pieter, 2019. "Effects of Shariah-compliant business practices on long-term financial performance," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 254-267.
    5. Mohd Ashari Bakri & Chia Chia Yong, 2023. "Determinants of Dividend Policies in Shariah Compliant and Non-Shariah Compliant Firms: A Panel Quantile Approach," Capital Markets Review, Malaysian Finance Association, vol. 31(1), pages 47-58.
    6. Anwer, Zaheer & Mohamad, Shamsher & Paltrinieri, Andrea & Hassan, M. Kabir, 2021. "Dividend payout policy of Shariah compliant firms: Evidence from United States," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    7. Alnori, Faisal & Alqahtani, Faisal, 2019. "Capital structure and speed of adjustment in non-financial firms: Does sharia compliance matter? Evidence from Saudi Arabia," Emerging Markets Review, Elsevier, vol. 39(C), pages 50-67.

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