Change in Sharia Screening Methodology and Share Price Informativeness

35 Pages Posted: 26 Jan 2018

See all articles by Yessy A. Peranginangin

Yessy A. Peranginangin

Monash University - Monash University Malaysia

Sheena Sara Suresh Phillip

Monash University - Monash University Malaysia

Tee Ming

Monash University - School of Business and Information Technology

Date Written: January 25, 2018

Abstract

Sharia compliant status gives assurance to Sharia based investors that their investment is in compliance with Islamic values. The implementation of new Sharia screening methodology, which is more demanding than the previous one, has significant impact on price informativeness in the Kuala Lumpur Stock Exchange (KLSE). We find that Sharia compliant firms have significantly greater return synchronicity after the new screening methodology is implemented. Our findings suggest that the implementation of the new screening methodology leads Sharia compliant firms to impound global and local market information. We also find that Sharia compliant firms with greater government ownership and CEO duality impound global and market information faster, respectively.

Keywords: Sharia screening, Price informativeness, Delay, Return synchronicity

JEL Classification: G14, G15

Suggested Citation

Peranginangin, Yessy A. and Phillip, Sheena Sara Suresh and Ming, Tee, Change in Sharia Screening Methodology and Share Price Informativeness (January 25, 2018). Available at SSRN: https://ssrn.com/abstract=3109788 or http://dx.doi.org/10.2139/ssrn.3109788

Yessy A. Peranginangin (Contact Author)

Monash University - Monash University Malaysia ( email )

Malaysia

Sheena Sara Suresh Phillip

Monash University - Monash University Malaysia ( email )

Malaysia

Tee Ming

Monash University - School of Business and Information Technology ( email )

Level 4, Building 6
Jalan Lagoon Selatan
Selangor Darul Ehsan 46150
Malaysia

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