Islamic Finance and Market Segmentation: Implications for the Cost of Capital

International Business Review, Forthcoming

24 Pages Posted: 15 Apr 2010 Last revised: 12 Jan 2011

See all articles by Bruce Allen Hearn

Bruce Allen Hearn

University of Southampton

Roger Strange

University of Sussex

Jenifer Piesse

University of Stellbosch; King's College London - Department of Management

Date Written: April 15, 2010


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 focusing 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.

Keywords: Islamic Finance, Segmentation, Sudan

Suggested Citation

Hearn, Bruce Allen and Strange, Roger Nicholas and Piesse, Jenifer, Islamic Finance and Market Segmentation: Implications for the Cost of Capital (April 15, 2010). International Business Review, Forthcoming. Available at SSRN:

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Roger Nicholas Strange

University of Sussex ( email )

School of Business, Management and Economics
Mantell Building
Brighton, Sussex BN1 9RF
United Kingdom
(44)1273-873531 (Phone)

Jenifer Piesse

University of Stellbosch

Stellenbosch, Western Cape
South Africa

King's College London - Department of Management ( email )

Virginia Woolf Building
22 Kingsway
London, England WC2B 6NR
United Kingdom

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