Islamic finance and market segmentation: Implications for the cost of capital
Islamic finance and market segmentation: Implications for the cost of capital
This paper considers the impact of full Islamic shari'ya compliance on developing stock exchanges in their effective provision of development capital. Evidence from a unique study focussing on the Sudan telecommunications company and its listings on the Khartoum as well as Arabian Gulf stock exchanges reveals that costs of capital are considerably higher in the former than latter markets. While there are firm governance benefits arising from Islamic finance monitoring costs are substantial and the banking system is better placed to administer financing arrangements. Larger firms are better placed to circumvent this segmentation through cross-listing on regional exchanges.
Cost of capital, Developing countries, Islamic finance, Market segmentation, Middle East and North Africa, Sudan
102-113
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Strange, Roger
6f7b0a47-0014-4242-ad02-f3476a75322f
February 2012
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Piesse, Jenifer
b85393d2-b4ae-49f2-87cd-8b5007c99e97
Strange, Roger
6f7b0a47-0014-4242-ad02-f3476a75322f
Hearn, Bruce, Piesse, Jenifer and Strange, Roger
(2012)
Islamic finance and market segmentation: Implications for the cost of capital.
International Business Review, 21 (1), .
(doi:10.1016/j.ibusrev.2010.11.007).
Abstract
This paper considers the impact of full Islamic shari'ya compliance on developing stock exchanges in their effective provision of development capital. Evidence from a unique study focussing on the Sudan telecommunications company and its listings on the Khartoum as well as Arabian Gulf stock exchanges reveals that costs of capital are considerably higher in the former than latter markets. While there are firm governance benefits arising from Islamic finance monitoring costs are substantial and the banking system is better placed to administer financing arrangements. Larger firms are better placed to circumvent this segmentation through cross-listing on regional exchanges.
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More information
Accepted/In Press date: 30 November 2010
e-pub ahead of print date: 24 December 2010
Published date: February 2012
Keywords:
Cost of capital, Developing countries, Islamic finance, Market segmentation, Middle East and North Africa, Sudan
Identifiers
Local EPrints ID: 423325
URI: http://eprints.soton.ac.uk/id/eprint/423325
ISSN: 0969-5931
PURE UUID: b69b3497-2239-4c1b-944e-fa0ac130a59e
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Date deposited: 20 Sep 2018 16:30
Last modified: 16 Mar 2024 04:37
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Author:
Jenifer Piesse
Author:
Roger Strange
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