Which Firms Use Islamic Financing?
Posted: 14 Jun 2017
Date Written: October 13, 2016
Abstract
This study explores to what extent the Islamic financing instruments are used by non-financial firms. Based on a panel data of firms from fourteen developing countries for the 2005–2009 period, we find that Islamic financing forms a significant share of the users’ capital structures. Less profitable firms are found more likely to use debt than equity in which case Islamic instruments were preferred over conventional debt. The finding suggests that Islamic financing does benefit less profitable firms, which is consistent with the agency cost perspective.
Keywords: Islamic Finance, Capital Structure, Agency Cost
JEL Classification: C33, G32, Z12
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