2012.
Inside-out: Perception of key Finance Professionals about Theory & Practice of Islamic Banking.International Journal of Humanities and Social Sciences Volume 2, No 4, pages 198-208.
Comparative Performance Study of Conventional and Islamic Banking in Pakistan. International Research Journal of Finance & Economics, Issue 83, pages 62-72.
2011
Differences and similarities in Islamic and Conventional Banking. International Journal of Business and Social Sciences Volume 2, No 2, pages 166-175.
Capital Assets Pricing at KSE and Fundamental Values: An analysis of FCF and EPS. World Applied Sciences Journal Volume 12, No 5, pages 607-12.
2010
Implications of earnings management for implementation of Shari’a based financial system. Interdisciplinary Journal of Contemporary Research in Business2:1. Pages 192-215.
Islamic Housing Finance: a Critical Analysis and Comparison with Conventional Mortgage. Middle Eastern Finance and Economics Issue 6.Pages 99-107.
Validity of Capital Assets Pricing Model: Evidence from KSE-Pakistan. European Journal of Economics, Finance and Administrative Sciences Issue 20 pages 148-161.
Testing application of CAP Model on KSE- Pakistan: A Case study on Tobacco Sector.Management Accountant Volume 19:3 (May- June)pages 16-20
2009
Testing Weak Form of Efficient Market Hypothesis: Empirical Evidence from South Asia. World Applied Sciences Journal, Volume 17, Issue 4, pages 414-27.
Determinants of Capital Structure in Textile Sector of Pakistan. Science Series Data Report, Volume 4, Issue 2, pages 3-13.
Abstract:
The efficient market hypothesis (EMH) suggests that stock prices fully reflect all available information in the market and no investor is able to earn excess return on the basis of some secretly held private, public or historical information. Efficient market hypothesis (EMH) can be further divided into three sub hypotheses depending upon the information set involved and these are weak form efficient market hypothesis, semi strong form efficient market hypothesis and strong form efficient market hypothesis. This research has examined the weak form of efficient market hypothesis on the four major stock exchanges of South Asia that are Karachi stock exchange (KSE-100), Bombay stock exchange (BSE-SENSEX), Colombo stock exchange (CSE-MPI) and Dhaka stock exchange (DSE-GEN). Historical index values of KSE-100, BSE-SENSEX, CSE-MPI and DSE-GEN on a monthly, weekly and daily basis for a period of 14 Years (July 1997 to June 2011). We applied four different statistical tests including runs test, serial correlation (Durbin Watson test), unit root and variance ratio test. Findings suggest that none of the four major stock markets of south-Asia follows Random-walk and hence all these markets are not the weak form of efficient market.
The efficient market hypothesis (EMH) suggests that stock prices fully reflect all available information in the market and no investor is able to earn excess return on the basis of some secretly held private, public or historical information. Efficient market hypothesis (EMH) can be further divided into three sub hypotheses depending upon the information set involved and these are weak form efficient market hypothesis, semi strong form efficient market hypothesis and strong form efficient market hypothesis. This research has examined the weak form of efficient market hypothesis on the four major stock exchanges of South Asia that are Karachi stock exchange (KSE-100), Bombay stock exchange (BSE-SENSEX), Colombo stock exchange (CSE-MPI) and Dhaka stock exchange (DSE-GEN). Historical index values of KSE-100, BSE-SENSEX, CSE-MPI and DSE-GEN on a monthly, weekly and daily basis for a period of 14 Years (July 1997 to June 2011). We applied four different statistical tests including runs test, serial correlation (Durbin Watson test), unit root and variance ratio test. Findings suggest that none of the four major stock markets of south-Asia follows Random-walk and hence all these markets are not the weak form of efficient market.
Abstract:
With the application of regression with common effect this paper analyzed the empirical validity of two famous and formal theories (Trade off and Pecking order). We have selected four independent variables tangibility, size, profitability and growth and explored their relationships with the dependent variable leverage in textile sector companies. After proper filteration 132 firms were selected as final sample for analysis for the period of 2001-2009. Balance sheet analysis published by State Bank of Pakistan has been used for the purpose of collecting data. Among the four hypothesis, tangiblity and size of the company were supporting the trade off theory where as profitability and growth supported pecking order theory. To check the stationary of data six panel unit root tests have been applied which provided strong evidences of rejecting the unit root in the panel structure. The results of the regression showed that tangiblity is most influencial determinant in debt financing decision and positively associated with leverage which is a confirmation of hypothesized prediction of trade off theory. Size and profitability failed to support trade off theory with their negative coefficient and supported the hypothesized prediction of the Pecking order theory. Growth with its negative coefficient supported the trade off theory but the results are not realible as it was not statistically significant. Thus keeping in view the four hypothesis and based on their results there is stronger support for the Pecking order theory in textile sector of Pakistan.
With the application of regression with common effect this paper analyzed the empirical validity of two famous and formal theories (Trade off and Pecking order). We have selected four independent variables tangibility, size, profitability and growth and explored their relationships with the dependent variable leverage in textile sector companies. After proper filteration 132 firms were selected as final sample for analysis for the period of 2001-2009. Balance sheet analysis published by State Bank of Pakistan has been used for the purpose of collecting data. Among the four hypothesis, tangiblity and size of the company were supporting the trade off theory where as profitability and growth supported pecking order theory. To check the stationary of data six panel unit root tests have been applied which provided strong evidences of rejecting the unit root in the panel structure. The results of the regression showed that tangiblity is most influencial determinant in debt financing decision and positively associated with leverage which is a confirmation of hypothesized prediction of trade off theory. Size and profitability failed to support trade off theory with their negative coefficient and supported the hypothesized prediction of the Pecking order theory. Growth with its negative coefficient supported the trade off theory but the results are not realible as it was not statistically significant. Thus keeping in view the four hypothesis and based on their results there is stronger support for the Pecking order theory in textile sector of Pakistan.
Abstract:
Islamic banking has shown tremendous growth in first decade of 21st century. By the end of 2008, global volume of assets under Islamic banking has reached to US $ 951 Billion. In Pakistan Islamic banking has displayed a tremendous average annual growth of 76% in last seven years and covers 6% of market share, however, keeping in view the religious linkages with this industry, expansion is much lower than potential. This study is conducted to document the perception of key players in financial industry about Islamic banking, to highlight the under lying issues, directly responsible for lesser expansion than potential of this industry. Findings suggest although at theoretical level, industry perceive Islamic banking correctly, however professionals are not satisfied about the practice.
Islamic banking has shown tremendous growth in first decade of 21st century. By the end of 2008, global volume of assets under Islamic banking has reached to US $ 951 Billion. In Pakistan Islamic banking has displayed a tremendous average annual growth of 76% in last seven years and covers 6% of market share, however, keeping in view the religious linkages with this industry, expansion is much lower than potential. This study is conducted to document the perception of key players in financial industry about Islamic banking, to highlight the under lying issues, directly responsible for lesser expansion than potential of this industry. Findings suggest although at theoretical level, industry perceive Islamic banking correctly, however professionals are not satisfied about the practice.
Abstract:
The purpose of this empirical study is to analyze and compare the performance of Islamic and conventional banking in Pakistan and to find out which of the banking stream is performing better than other. For this study, sample of 22 conventional banks and 5 Islamic banks were selected. For in-depth understanding and sound comparison, key performance indicators were divided into external and internal bank factors. The external factor analysis includes studying the customer behavior and perception about both Islamic and conventional banking. Internal factor analysis includes measure of differences in performance of Islamic and conventional banks in terms of profitability, liquidity, credit risk and solvency. Nine financial ratios were used to gauge profitability, liquidity and credit risk; and a model known as “Bank-o-meter” is used to gauge solvency. Findings suggest in terms of profitability and liquidity conventional banking leads, while in credit risk management and solvency maintenance Islamic banking dominates. Motivating factors for customers of Islamic banking are the location and Shari’a compliance, while in case of conventional banking it is wide range of products and services.
The purpose of this empirical study is to analyze and compare the performance of Islamic and conventional banking in Pakistan and to find out which of the banking stream is performing better than other. For this study, sample of 22 conventional banks and 5 Islamic banks were selected. For in-depth understanding and sound comparison, key performance indicators were divided into external and internal bank factors. The external factor analysis includes studying the customer behavior and perception about both Islamic and conventional banking. Internal factor analysis includes measure of differences in performance of Islamic and conventional banks in terms of profitability, liquidity, credit risk and solvency. Nine financial ratios were used to gauge profitability, liquidity and credit risk; and a model known as “Bank-o-meter” is used to gauge solvency. Findings suggest in terms of profitability and liquidity conventional banking leads, while in credit risk management and solvency maintenance Islamic banking dominates. Motivating factors for customers of Islamic banking are the location and Shari’a compliance, while in case of conventional banking it is wide range of products and services.
Risk and Return Under Shari’a Framework: An Attempt to Develop Shari’a Compliant Asset Pricing Model-SCAPM. Pakistan Journal of Commerce and Social Sciences Volume 5, No 2, pages 283-292.
Abstract:
Islamic finance has shown tremendous growth in last two decades. By the end of December 2008, in more than 50 countries approximately 300 institutions are operating and they manage funds of US $951 billion. As IFIs are entering into equity market for investment hence guidance in the field of security pricing is required. There is a need to analyze the existing security pricing models within the filter of Sharia compliance and suggest an alternative where required. This study is an attempt to analyze the technical asset pricing models (CAPM, APT and multifactor models) based on behavior of stock market and macroeconomic factors, test the validity through Sharia compliance filter and suggest modification if required. Findings suggest that existing technical asset pricing models are very much applicable under Sharia frame work with a minor modification of risk free return because under Islamic financial system risk free return does not exist. Traditional CAPM is convertible into SCAPM by eliminating risk free return and including inflation charge.
Islamic finance has shown tremendous growth in last two decades. By the end of December 2008, in more than 50 countries approximately 300 institutions are operating and they manage funds of US $951 billion. As IFIs are entering into equity market for investment hence guidance in the field of security pricing is required. There is a need to analyze the existing security pricing models within the filter of Sharia compliance and suggest an alternative where required. This study is an attempt to analyze the technical asset pricing models (CAPM, APT and multifactor models) based on behavior of stock market and macroeconomic factors, test the validity through Sharia compliance filter and suggest modification if required. Findings suggest that existing technical asset pricing models are very much applicable under Sharia frame work with a minor modification of risk free return because under Islamic financial system risk free return does not exist. Traditional CAPM is convertible into SCAPM by eliminating risk free return and including inflation charge.
Abstract:
Islamic Banking is growing at a rapid speed and has showed unprecedented growth and expansion in last two decades in spite of mismatching of existing financial framework and business practices. By the end of 2011 volume of assets under Islamic banking has reached to US $ 1,289 Billion with operation in more than 50 countries. Middle East is the center of Islamic banking with contribution of approximately 80% while 20% share is contributed by rest of the world. In Pakistan Islamic banking is at infant stage although last 9 years growth is marvelous. Islamic banking has grown at an average annual rate of 66% in the last nine years (01/04 - 09/12) in Pakistan. Although Islamic banking faces multi challenges however three of them are very vital for its existence. First is Shari’a compliance in its operations in an environment which is dominated by interest based practices even in Muslim societies. Second is perception of financial industry practitioners about its performance whether the system is able to serve the total needs of trade and industry. Third is the perception of a large majority of Muslims whether existing practice of Islamic banking is Shari’a compliant or mere copy of conventional practices under the banner of Shari’a. This study is an attempt to address the perceptional issues by identifying the similarities and differences in Islamic and conventional banking. Evidences suggest Islamic banking is very much practiced like modern conventional banking with certain restrictions imposed by Shari’a and addresses the large number of business requirements successfully hence perceiving Islamic banking as totally foreign to business world is not correct. It is further found in the study that Islamic banking is not a mere copy of conventional practices rather major differences exist in the operations of Islamic Financial Institutions (IFIs) in comparison with conventional banking. IFIs have succeeded in creating trust in the eyes of depositors and receive deposits on profit and loss sharing basis however investment and financing options available to Islamic banks are limited in comparison with conventional banks.
Islamic Banking is growing at a rapid speed and has showed unprecedented growth and expansion in last two decades in spite of mismatching of existing financial framework and business practices. By the end of 2011 volume of assets under Islamic banking has reached to US $ 1,289 Billion with operation in more than 50 countries. Middle East is the center of Islamic banking with contribution of approximately 80% while 20% share is contributed by rest of the world. In Pakistan Islamic banking is at infant stage although last 9 years growth is marvelous. Islamic banking has grown at an average annual rate of 66% in the last nine years (01/04 - 09/12) in Pakistan. Although Islamic banking faces multi challenges however three of them are very vital for its existence. First is Shari’a compliance in its operations in an environment which is dominated by interest based practices even in Muslim societies. Second is perception of financial industry practitioners about its performance whether the system is able to serve the total needs of trade and industry. Third is the perception of a large majority of Muslims whether existing practice of Islamic banking is Shari’a compliant or mere copy of conventional practices under the banner of Shari’a. This study is an attempt to address the perceptional issues by identifying the similarities and differences in Islamic and conventional banking. Evidences suggest Islamic banking is very much practiced like modern conventional banking with certain restrictions imposed by Shari’a and addresses the large number of business requirements successfully hence perceiving Islamic banking as totally foreign to business world is not correct. It is further found in the study that Islamic banking is not a mere copy of conventional practices rather major differences exist in the operations of Islamic Financial Institutions (IFIs) in comparison with conventional banking. IFIs have succeeded in creating trust in the eyes of depositors and receive deposits on profit and loss sharing basis however investment and financing options available to Islamic banks are limited in comparison with conventional banks.
Abstract:
This study is conducted to test the impact of two fundamental values (FCF & EPS), depicted through financial reports, on security prices. Sample includes all nonfinancial firms listed in KSE-30 Index and covers 9 years period 2000-08. Valuation of securities done through discounting of free cash flows and impact on security prices variation is calculated by regressing FCFE & EPS with market price. Findings suggest that on KSE investors give relatively higher (62%) weightage to EPS and very low (9%) to FCFE. These findings are very surprising to the author as accrued income has gained more weight in the eyes of investors than free cash flows while making investment decision. It could be due to any of the following reasons. First companies’ cash flows are lacking patterns and huge variations exist. Second irrational behavior of investors and noise traders; and finally dominance of speculative activities in the market. Another aspect of these findings may be higher degree confidence of investors in financial reports.
This study is conducted to test the impact of two fundamental values (FCF & EPS), depicted through financial reports, on security prices. Sample includes all nonfinancial firms listed in KSE-30 Index and covers 9 years period 2000-08. Valuation of securities done through discounting of free cash flows and impact on security prices variation is calculated by regressing FCFE & EPS with market price. Findings suggest that on KSE investors give relatively higher (62%) weightage to EPS and very low (9%) to FCFE. These findings are very surprising to the author as accrued income has gained more weight in the eyes of investors than free cash flows while making investment decision. It could be due to any of the following reasons. First companies’ cash flows are lacking patterns and huge variations exist. Second irrational behavior of investors and noise traders; and finally dominance of speculative activities in the market. Another aspect of these findings may be higher degree confidence of investors in financial reports.
Islamic Financing and Business Framework: A Survey. European Journal of Social SciencesVolume 15 No, 4. Page 475-489.
Abstract:
This study is conducted to evaluate suitability of existing business environment in Pakistan for application of sharia based financing. Opinion survey of finance professionals, Islamic Bankers, entrepreneurs and academicians is conducted through questionnaire. Findings suggest number of hurdles including dominance of conventional banking, earnings manipulation by firms, higher taxes, weaker auditing, lack of trust and confidence in the abilities of Musharaka partners, riskiness of Musharaka and inability of conventional financial reporting framework to ensure transparency, are in the way of popularity of Musharaka financing. Increased awareness, new products development, capacity building of IFIs, reforms in financial reporting framework and strengthening audit institution, might be helpful in implementation of Musharaka financing.
This study is conducted to evaluate suitability of existing business environment in Pakistan for application of sharia based financing. Opinion survey of finance professionals, Islamic Bankers, entrepreneurs and academicians is conducted through questionnaire. Findings suggest number of hurdles including dominance of conventional banking, earnings manipulation by firms, higher taxes, weaker auditing, lack of trust and confidence in the abilities of Musharaka partners, riskiness of Musharaka and inability of conventional financial reporting framework to ensure transparency, are in the way of popularity of Musharaka financing. Increased awareness, new products development, capacity building of IFIs, reforms in financial reporting framework and strengthening audit institution, might be helpful in implementation of Musharaka financing.
Abstract:
This paper documents the issues of earnings manipulation and their likely impact on sharia based financial system. Methodology includes thorough literature review, analogy and basic document interpretation for conclusion. Findings suggest earnings management is likely a cause of lesser popularity of sharia based financial system. Through regulation, capacity building of auditing professionals, compensating management through stock ownership, creating an environment of job security for managers and financially literate board of directors’ earnings management can be minimized which will ultimately help in popularity and implementation of sharia based financial system.
This paper documents the issues of earnings manipulation and their likely impact on sharia based financial system. Methodology includes thorough literature review, analogy and basic document interpretation for conclusion. Findings suggest earnings management is likely a cause of lesser popularity of sharia based financial system. Through regulation, capacity building of auditing professionals, compensating management through stock ownership, creating an environment of job security for managers and financially literate board of directors’ earnings management can be minimized which will ultimately help in popularity and implementation of sharia based financial system.
Abstract:
Housing is considered the basic necessity of human being and its shortage is a major problem worldwide especially in less developed countries including Pakistan. Recently the commercial banks in Pakistan have started looking for housing finance. In addition to conventional banks Islamic banks are also providing housing finance This paper is focusing on house financing needs in Pakistan and critically analyzes the existing model of Islamic housing finance (in practice) along with comparison of conventional mortgage. As per findings of this study huge potential for financing exists in local market. Current model of Islamic housing finance (in practice) is not matched with the principles of Musharaka however it suits in competing with conventional banks. The major difference (risk and reward sharing) between Islamic and conventional finance is lacking in operations of IFIs. At final pages of study a comparison of conventional housing finance and Islamic housing finance is provided which concludes that in conventional return is fixed while in Islamic return is variable taking into account value appreciation (depreciation) in addition to rentals.
Housing is considered the basic necessity of human being and its shortage is a major problem worldwide especially in less developed countries including Pakistan. Recently the commercial banks in Pakistan have started looking for housing finance. In addition to conventional banks Islamic banks are also providing housing finance This paper is focusing on house financing needs in Pakistan and critically analyzes the existing model of Islamic housing finance (in practice) along with comparison of conventional mortgage. As per findings of this study huge potential for financing exists in local market. Current model of Islamic housing finance (in practice) is not matched with the principles of Musharaka however it suits in competing with conventional banks. The major difference (risk and reward sharing) between Islamic and conventional finance is lacking in operations of IFIs. At final pages of study a comparison of conventional housing finance and Islamic housing finance is provided which concludes that in conventional return is fixed while in Islamic return is variable taking into account value appreciation (depreciation) in addition to rentals.
Abstract:
Capital Assets Pricing Model (CAPM) is the widely tested, accepted and rejected model of asset pricing. From its beginning (1964) it has occupied the prime place and still part of the text books on finance in leading business schools. This study is conducted in Pakistani institutional frame work covering six years period (2003 t0 2008). Purpose of the research is to form an opinion about authenticity and validity of CAPM. Our methodology includes the beta calculation through variance/covariance approach in order to predict the required return, consequently price the underlying security. Pricing of the security and risk calculation is required by the investors in portfolio composition. In this study returns used are the capital gains only due to unavailability of information about the dividends paid. Historical returns are used for calculation of results. Findings suggest that CAPM gives accurate results for a limited period and for few companies only. Out of 360 observations only 28 results supporting CAPM while 332 are against it, hence model is rejected in this institutional frame work.
Capital Assets Pricing Model (CAPM) is the widely tested, accepted and rejected model of asset pricing. From its beginning (1964) it has occupied the prime place and still part of the text books on finance in leading business schools. This study is conducted in Pakistani institutional frame work covering six years period (2003 t0 2008). Purpose of the research is to form an opinion about authenticity and validity of CAPM. Our methodology includes the beta calculation through variance/covariance approach in order to predict the required return, consequently price the underlying security. Pricing of the security and risk calculation is required by the investors in portfolio composition. In this study returns used are the capital gains only due to unavailability of information about the dividends paid. Historical returns are used for calculation of results. Findings suggest that CAPM gives accurate results for a limited period and for few companies only. Out of 360 observations only 28 results supporting CAPM while 332 are against it, hence model is rejected in this institutional frame work.
Abstract:
This study is conducted on Tobacco sector companies listed on stock exchange in Pakistan. Application of capital assets pricing model is tested. Data is collected from 2004-07 listed on KSE. Beta calculated through co variance of security with market. Findings raised question about the validity of CAP Model. Security returns are not as per the demand of the model. In certain years the actual return was much greater than required and in some other years the actual return was much lesser than required. The year in which actual return was more than required the security was undervalued and vice versa; consequently, investors misguided. The beta calculation depicted different results for different periods. Monthly relationship is stronger than weekly relationship. Beta with smaller period observations is higher than larger period observations.
This study is conducted on Tobacco sector companies listed on stock exchange in Pakistan. Application of capital assets pricing model is tested. Data is collected from 2004-07 listed on KSE. Beta calculated through co variance of security with market. Findings raised question about the validity of CAP Model. Security returns are not as per the demand of the model. In certain years the actual return was much greater than required and in some other years the actual return was much lesser than required. The year in which actual return was more than required the security was undervalued and vice versa; consequently, investors misguided. The beta calculation depicted different results for different periods. Monthly relationship is stronger than weekly relationship. Beta with smaller period observations is higher than larger period observations.
Test of linearity in Ke and Kd as claimed in M&M Theorem: Evidence from KSE-Pakistan. Online available free at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1549465
Abstract:
This study is conducted to test the linearity between cost of debt and leverage as claimed in 2nd proposition of Modigliani and Miller theorem. Sample size is KSE-30 Pakistan after excluding financial firms. Findings suggest that linearity does not exist between Ke and Kd hence raises questions about the validity of M&M Model.
2013
Impact of Financial Sector Variables on Shari’a Compliant Cross-section Stock Returns. Fifth Annual American Business Research Conference, 6-7 June 2013, Sheraton LaGuardia East Hotel, New York, USA
Comparative Testing of Capital Asset Pricing Model (CAPM) and Shari’a Compliant Asset Pricing Model (SCAPM): Evidence from Karachi Stock Exchange – Pakistan. Presented in 4th South Asian International Conference (SAICON’12), 5th to 7th December 2012, Bhurban, Pakistan. Available at:
Seminar on Islamic Banking: Kent Business School, University of Kent, Canterbury, England, UK. Available at: http://www.kent.ac.uk/kbs/research/seminar-archive/muhammad_hanif.html
Re-action of Market to Shari’a Compliant Index (KMI-30). Presented in 6th International Business Research Conference, 12-13 April 2012, Dubai, UAE. http://www.wbiconpro.com/601-Hanif.pdf
Inside-out: Perception of key Finance Professionals about Theory & Practice of Islamic Banking. 2nd International Conference on Islamic Business 2012, February 28-29, 2012, NIBAF, Islamabad, Pakistan.
2007
Seminar in Bahria University Islamabad. Presentation available at SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1604370
B-Conference Attended
1. Conference on “Emotional Intelligence” June 23-25, Harvard Medical School
2. Conference on “Spirituality & Urbanization”. June 8th 2013, Harvard Divinity School
3. Conference on “Islamic Business” organized by RCIB-Riphah International University, NIBAF, February 28-29, 2012, Islamabad.
4. Conference on “Islamic banking and Takaful” organized by Al Huda Centre of Banking and Economics dated November 02, 200, Islamabad.
5. IEEE ICET 2009 organized by FAST National University Islamabad dated October 19-20, 2009.
This study is conducted to test the linearity between cost of debt and leverage as claimed in 2nd proposition of Modigliani and Miller theorem. Sample size is KSE-30 Pakistan after excluding financial firms. Findings suggest that linearity does not exist between Ke and Kd hence raises questions about the validity of M&M Model.
A-Conference papers/Seminars
Impact of Real Sector Variables on Shari’a Compliant Cross-section Stock Returns. Fifth South Asian Conference (SAICON 2013) 4-6 December 2013, Pearl Continental Hotel, Bhurban, Murree, Pakistan
Abstract
Shari’a compliant stocks are the recent development under Islamic finance, whereby stocks are screened through Shari’a compliance filters. This study is conducted to understand and document the important Real Sector macroeconomic factors contributing in determining stock prices of Shari’a compliant companies in Pakistan. Our sample includes all 97 non financial companies screened by Al-Meezan Investment Management Ltd; based on accounting results of 2009. We have included Six Macroeconomic variables in addition to market index in our study for ten years period (2001-10). Results identified Zero real sector variable in pricing; however, with the inclusion of market index in analysis, the single important variable in pricing of Shari’a compliant securities is market Beta. Evidence favors CAPM for pricing of securities in local market as market index captures the risk of macroeconomic variables.
Impact of Financial Sector Variables on Shari’a Compliant Cross-section Stock Returns. Fifth Annual American Business Research Conference, 6-7 June 2013, Sheraton LaGuardia East Hotel, New York, USA
Abstract
Shari’a compliant stocks are the recent development under Islamic finance, whereby stocks are screened through Shari’a compliance filters. This study is conducted to understand and document the important monetary factors contributing in determining stock prices of Shari’a compliant companies in Pakistan. Our sample includes all 97 non financial companies screened by Al-Meezan Investment Management Ltd; based on accounting results of 2009. We have included four monetary variables in addition to market index in our study for ten years period (2001-10). Results identified two important variables in pricing; however, with the inclusion of market index in analysis, the single important variable in pricing of Shari’a compliant securities is market Beta. Evidence favors CAPM for pricing of securities in local market as market index captures the risk of macroeconomic variables.
Economic Substance or Legal Form: An Evaluation of Islamic Finance Practice. Global Forum on Islamic Finance, 11thto 13th March, 2013, Pearl Continental Hotel, Lahore, Pakistan.
Abstract
Islamic banking, based on principles of Islam, was started in last quarter of twentieth century and got momentum in first decade of twenty first century. By the end of December 2011, Global volume of assets, under Islamic financial system, have reached to US $ 1,289 Billion. In Pakistan Islamic banking has shown marvelous growth of 65% during last nine years (2004-12).
Purpose: Islamic banking is based on ideology of Islam proposing a different economic system than capitalism. Essence of Islamic banking is either trading of goods, provision of services and investment under profit and loss sharing. This study is conducted to examine legal form as well as economic substance of contracts used by Islamic financial industry.
Design/Methodology: There are four deposit collection and ten investment and financing modes suggested for Islamic banking. In order to conclude on objectives of study five most widely used contracts (modes) including Murabaha, Ijarah, Diminishing Musharaka, Skuk and Mudaraba (deposits), were selected to test against the theory of Islamic financial system.
Findings: It is found in the process that legally (legal form) contracts are in line with theory; however economic substance is not very different from conventional counter parts.
Practical Implications: Through application of alternative calculation measures and proper training of human resources, Islamic financial Institutions can shift economic substance of contracts in line with theory of Islamic finance.
Originality/Value: Islamic finance is emerging area and reasonably good amount of literature is available, however perhaps this is the only piece of work on economic substance of Islamic finance in addition to legal form.
2012
Frontiers in Islamic Finance. Presented in Seminar titled “Financial and Economic Wisdom of Prophet Muhammad (PBUH)” 12th February 2013, ICMAP, Islamabad, Pakistan. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2223224
Abstract:
This lecture was delivered in ICMAP Islamabad on February 12, 2013. It includes following subtopics: Why Islamic Finance? What are the principles of Islamic finance? What are features of Islamic banking? How Islamic banking developed (a brief history)? What is current status (industry overview)? Comparative Performance of conventional and Islamic banking in Pakistan; Products (contracts) used by Islamic bankers; Brief intro of capital market activities (of Shari’a compliant Investors); Global Impact of Islamic finance; Challenges for Islamic finance industry.
This lecture was delivered in ICMAP Islamabad on February 12, 2013. It includes following subtopics: Why Islamic Finance? What are the principles of Islamic finance? What are features of Islamic banking? How Islamic banking developed (a brief history)? What is current status (industry overview)? Comparative Performance of conventional and Islamic banking in Pakistan; Products (contracts) used by Islamic bankers; Brief intro of capital market activities (of Shari’a compliant Investors); Global Impact of Islamic finance; Challenges for Islamic finance industry.
Abstract:
CAPM is most widely used economic model for pricing of securities, although criticized on different basis and alternative CAPM’s were developed in the hope of better explanatory power. Islamic finance has shown remarkable performance and growth in first decade of 21st century. In order to increase liquidity Islamic finance practitioners have entered in stock market and by 2008 nine Islamic indexes are operating worldwide. Risk free return is not accepted in Islamic financial literature hence traditional CAPM is not suitable for security valuation for Sharia compliant investments. Hanif (2011) presented a Sharia compliant asset pricing model (SCAPM) for valuation of Sharia compliant securities. The purpose of this study is to test the CAPM and SCAPM comparatively on KSE-100 to document the results and present findings as which of the model explain more variation in stock returns. Study period covers nine years (Jul 2001- Jun 2010). For calculation of returns historical prices of securities and market index is used. Portfolio technique (based on market capitalization) was used for analysis and results obtained through OLS. Findings of the study are very interesting to researchers as well. No significant results found in higher and lower capitalization portfolios under any of the model, however results were statistically significant for middle capitalization portfolio and explanatory power of SCAPM was better than CAPM.
CAPM is most widely used economic model for pricing of securities, although criticized on different basis and alternative CAPM’s were developed in the hope of better explanatory power. Islamic finance has shown remarkable performance and growth in first decade of 21st century. In order to increase liquidity Islamic finance practitioners have entered in stock market and by 2008 nine Islamic indexes are operating worldwide. Risk free return is not accepted in Islamic financial literature hence traditional CAPM is not suitable for security valuation for Sharia compliant investments. Hanif (2011) presented a Sharia compliant asset pricing model (SCAPM) for valuation of Sharia compliant securities. The purpose of this study is to test the CAPM and SCAPM comparatively on KSE-100 to document the results and present findings as which of the model explain more variation in stock returns. Study period covers nine years (Jul 2001- Jun 2010). For calculation of returns historical prices of securities and market index is used. Portfolio technique (based on market capitalization) was used for analysis and results obtained through OLS. Findings of the study are very interesting to researchers as well. No significant results found in higher and lower capitalization portfolios under any of the model, however results were statistically significant for middle capitalization portfolio and explanatory power of SCAPM was better than CAPM.
Abstract:
Islamic banking has shown tremendous growth in the first decade of 21st century. By the end of 2011, global volume of assets under Islamic finance has reached to US$ 1,289 billion. In Pakistan, Islamic banking has displayed a tremendous annual average growth of 76% during the last seven years and accounts for more than 7% of the market share (SBP-2011). One of the major constraints faced by Islamic banking in local market is the liquidity management through investing in marketable securities. As per Islamic banking regulations Sharia compliance of underlying security is prerequisite to qualify for investment by an Islamic bank. This led to the screening of equity securities through Sharia compliance filtering criteria. This study documents the perception of key players in industry about Sharia compliant equities, to highlight the market reaction about KSE-Meezan Index (KMI-30). Survey results suggest that although a majority of respondents correctly perceive the theoretical framework of Islamic Index, however participation in the process is very low (less than 30%).
Islamic banking has shown tremendous growth in the first decade of 21st century. By the end of 2011, global volume of assets under Islamic finance has reached to US$ 1,289 billion. In Pakistan, Islamic banking has displayed a tremendous annual average growth of 76% during the last seven years and accounts for more than 7% of the market share (SBP-2011). One of the major constraints faced by Islamic banking in local market is the liquidity management through investing in marketable securities. As per Islamic banking regulations Sharia compliance of underlying security is prerequisite to qualify for investment by an Islamic bank. This led to the screening of equity securities through Sharia compliance filtering criteria. This study documents the perception of key players in industry about Sharia compliant equities, to highlight the market reaction about KSE-Meezan Index (KMI-30). Survey results suggest that although a majority of respondents correctly perceive the theoretical framework of Islamic Index, however participation in the process is very low (less than 30%).
Abstract:
Islamic banking has shown tremendous growth in first decade of 21st century. By the end of 2008, global volume of assets under Islamic banking has reached to US $ 951 Billion. In Pakistan Islamic banking has displayed a tremendous average annual growth of 76% in last seven years and covers 6% of market share, however, keeping in view the religious linkages with this industry, expansion is much lower than potential. This study is conducted to document the perception of key players in financial industry about Islamic banking, to highlight the under lying issues, directly responsible for lesser expansion than potential of this industry. Findings suggest although at theoretical level, industry perceive Islamic banking correctly, however professionals are not satisfied about the practice.
Islamic banking has shown tremendous growth in first decade of 21st century. By the end of 2008, global volume of assets under Islamic banking has reached to US $ 951 Billion. In Pakistan Islamic banking has displayed a tremendous average annual growth of 76% in last seven years and covers 6% of market share, however, keeping in view the religious linkages with this industry, expansion is much lower than potential. This study is conducted to document the perception of key players in financial industry about Islamic banking, to highlight the under lying issues, directly responsible for lesser expansion than potential of this industry. Findings suggest although at theoretical level, industry perceive Islamic banking correctly, however professionals are not satisfied about the practice.
2007
Abstract:
This paper is a presentation of a lecture delivered in a seminar at Bahria University. It includes a brief introduction of interest free banking in Pakistan. It includes constitutional obligations and court decisions.
This paper is a presentation of a lecture delivered in a seminar at Bahria University. It includes a brief introduction of interest free banking in Pakistan. It includes constitutional obligations and court decisions.
1. Conference on “Emotional Intelligence” June 23-25, Harvard Medical School
2. Conference on “Spirituality & Urbanization”. June 8th 2013, Harvard Divinity School
3. Conference on “Islamic Business” organized by RCIB-Riphah International University, NIBAF, February 28-29, 2012, Islamabad.
4. Conference on “Islamic banking and Takaful” organized by Al Huda Centre of Banking and Economics dated November 02, 200, Islamabad.
5. IEEE ICET 2009 organized by FAST National University Islamabad dated October 19-20, 2009.
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