Islamic banking and Finance (IBF) provides products and services guided by the Shariah. Therefore, they are supposed to be different from their conventional counterparts. Islamic deposit rates should be different from conventional deposit rates. Islamic banking profit rates are supposedly less risky due to risksharing attribute embedded in their structure as compared to the conventional banking interest rates on similar-risk investment products. This paper addresses this concern by examining the differences in the monthly fixed deposit rates of conventional and investment deposit rates of Islamic banks and finance companies in Malaysia for the period from January 1994 to December 2012 and determines the causality relationship between profit rates and interest rates on these investments. The findings suggest that profit rates of Islamic banks are significantly linked with interest rates of conventional banks.

The main objective of this study is to identify the main determinants of the Islamic banks' performance in Gulf Cooperation Council (GCC) regions. The research uses both static model (fixed effects and random effects) and Generalized method of Moments (GMM). The data for this study are obtained from the annual reports of 29 Islamic banks from GCC countries using Bankscope database for the period from 2005 to 2013. The empirical findings reveal that Islamic banks' specific factors such as the equity financing and bank size are positive and statistically significant to the profitability of Islamic banks. The operating efficiency ratio is negatively and statistically significant to return on asset.

This study aims to dispel the myth of the value anomaly by employing the logic of the well-known Austrian British philosopher Sir Karl Raimund Popper, who espoused that positive outcomes of empirical observation cannot confirm an anomaly, such as value premium (Popper, 1953).

This paper contradicts the existence of a universal value anomaly by studying Malaysia, a country with a unique institutional setting. We investigate this counter-example to attribute the anomaly to: 1) the leverage effect of value firms; 2) the investment pattern of growth firms; 3) the economic environment. We find that the value premium cannot be ascribed solely to risk as it is time varying and dependent on the attributes of the companies. Our results illustrate that small cap value firms perform relatively well during favourable economic conditions. In contrast, large cap growth firms perform better than their counterparts (i.e., large cap value firms) in economic upturns as they are preferentially awarded projects to revive the nation's growth.

Cost efficiency plays a significant role in bank risk taking behaviour. This paper examines the effect of cost efficiency on the liquidity risk of Islamic banks and conventional banks in 16 OIC countries from 1999 to 2013. The findings suggest that cost efficiency has a positive effect on liquidity risk. Other significant factors of liquidity risk include capital, bank specialization, credit risk, profitability, size, GDP and inflation whereas market concentration is not significant contributor to banking liquidity risk. There is weak evidence to support the notion that Islamic banks have higher level of liquidity risk than conventional banks. The findings imply the need to provide liquidity, probably through a well-functioning money market to lower liquidity risk in banking.

In presence of the market frictions, firms aim to attain target capital structure by making strategic choices towards re-engineering the leverage. These choices influence not only firm’s investment patterns, capital costs and expected returns but also lead to conflict of interest among the stakeholders. The dynamic market forces make targeting a continuous exercise for the firm, as it strives to make optimal financing decisions to raise its value and reduce the risk of bankruptcy. An occurrence of acute financial crisis disturbs the capital structure and firms may foresee this and try to adjust. If adjustment is seen prior to a crisis in favour of higher leverage and moving away from the optimum capital structure, then it may signify cheaper adjusting costs and greater access to the debt financing. If adjustment takes place post crisis, then it means that valuable lessons are learnt and steps are taken to attain the optimum capital structure.

The slides highlight 1) finance growth theory used in the study; 2) social cohesion and growth nexus.

Studies of Islamic banks' profitability are an important tool towards improving performance, evaluating bank operations and determining management plan to help in increasing the chance for the banks to survive in competitive markets. The robust growth in financing and investment activities across most jurisdictions in various real sectors has helped Islamic banks to record generous asset growth rates in their balance sheets. However, the returns become subdued during the financial crisis of years of 2008-2009, reaching lows of ROA 0.74% and ROE 6.16% in 2009 (IFSB, 2014). Over the last twenty years, market conditions in banking sector have undergone extensive changes on both demand and supply sides ...

The capital structure choices of a firm not only determine the current value of the firm, but also largely determine its long-term survival. Modigliani and Miller's seminal 1958 paper explicates conventional firms' capital structure choices. However, we are yet to develop a solid theoretical framework about the financing decisions of Islamic firms. This is a review chapter on current developments in the field of Islamic capital structure. The chapter starts with a short discussion about the various sources of capital and their advantages and disadvantages, followed by a detailed description of traditional capital structure theories and their real-world empirical evidence. Finally, it discusses how the capital structure decision for Islamic firms differs from that for conventional firms, and the role sukuk, dual-banking system, and debt threshold play in determining Islamic firms' capital structure

The sum of global Islamic assets under management (AUM) is relatively small compared with the overall market. In the third quarter of 2015, Islamic AUM represented approximately 1% of the global market or US$60.2 billion; nevertheless, Malaysia contributes the largest portion with a total value of US$27.2 billion, according to data from the International Shariah Research Academy for Islamic Finance and Zawya. Chart 2 illustrates the position of Malaysia as a market leader for Islamic fund management. Growth in this industry, even if it’s small, would be a significant boost to the Malaysian economy and crucial when we need to diversify our economy in order to reduce the over-reliance on commodities. However, we are facing a number of challenges, some of which are expounded in the following paragraphs.

This paper examines the flow-performance relationship and the presence of "Smart money effect" in Socially responsible funds (SRFs) and Shariah compliant funds (SCFs). A survivorship bias free sample of 686 funds comprising of 212 SCFs and 474 SRFs were analysed with investment focus in the Asia pacific, Emerging markets, Europe, Global (with no focus to any specific country or region), Middle East and North Africa (MENA) and North America. The findings show that flow-performance relationship is asymmetric for both the funds as the response to positive returns is more as compare to the negative returns for the last/current year as well as the last/current month. There is also a significant presence of "Smart money effect" in both the funds for the entire sample but there is no evidence of "Smart money effect" in SRFs for the sample of old funds.

The slides highlight the research questions on: 1) do SCF investors react positively to the past performance?; 2) is the response of SCF investors to past performance (positive or negative) similar to that of SRF investors?; 3) do these funds respond asymmetrically to positive/negative returns?; 4) are SCF's and SRFs financially smart?

Although Islam was introduced to South East Asia through traders in the 12th century and gained wide acceptance throughout the region in the 14th and 15th centruries (McDonnel, 1986; Ishak & Abdullah, 2012), the earliest hajj undertakings began only in 1849 (Baharudin, 2014). At that time, Malaysia then Malaya was a British colony. However, under the Pangkor Treaty of 1874, the British pledged that they would not interfere in the religion, customs and traditions of the Malays (Baharudin, 2014).

Similar to any type of financial asset, sukuk are vulnerable to macroeconomic conditions and business cycles. In 1999, there were a series of high-profile sukuk defaults globally that tarnised the market's confidence in sukuk. Among these were the East Cameron Partners (ECP), in which the company failed to pay the periodic returns that amounted to US$166 million (Zaheer and Wijnbergen, 2013). Nakheel Sukuk of Dubai are issued by the Gulf Cooperation Council (GCC) and Malaysian companies that include Johor Corporation, Ingress Sukuk Berhad, Tracoma Holdings Berhad and Nam Fatt Corporation Berhad.

Studies on Islamic banks' profitability are important towards improving performance, evaluating bank operations and determining management plan to survive in competitive markets. The present study seeks to fill a gap by providing new empirical evidence on the factors that influence the profitability of the Islamic banks. The ordinary least square method is employed using annual data of 2013 on 44 Islamic banks from Asian and African region. The findings reveal that bank-specific factors such as the operating efficiency ratio are negatively and statistically significant to the profitability of the Islamic banks, while equity financing is positive and statistically significant to the profitability. The credit risks and liquidity risks factors are insignificant on the performance of the Islamic banks. On the other hand, macroeconomic factors such as inflation have a positive and significant impact on the profitability whereas GDP growth rate has no significant impact on the profitability of Islamic banks.