The Effects of Shariah Board Composition on Islamic Equity Indices' Performance

12 Pages Posted: 5 Jun 2018

See all articles by M. Kabir Hassan

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Federica Miglietta

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Business Studies and Private Law

Andrea Paltrinieri

University of Verona

josanco floreani

Università degli Studi di Udine

Date Written: July 2018

Abstract

Based on a sample of 54 Islamic indices over the period 2007–2014, we investigate the effect of Shariah board members' educational background on Islamic indices' risk and return characteristics via the screening criteria. Using a capital asset pricing model benchmark analysis, we assess the sensitivity of Islamic indices to their conventional peers in terms of beta and derive a measure of return (Jensen's alpha). First, we observe that the higher the number of members in common among the boards, the higher the risk–return profile of Islamic indices. Second, commonalities among board members lead to standardization of the screening criteria and to similar Islamic indices' performance. Third, we show that different betas across providers depend on the screening criteria, while the economic educational background of board members affects performance in terms of Jensen's alpha. Our study aims at contributing to the governance literature related to board composition and its importance as a possible driver of performance. In addition, given the impressive growth that Islamic finance has experienced during the last decade, this topic is of great interest to the asset management industry.

Suggested Citation

Hassan, M. Kabir and Miglietta, Federica and Paltrinieri, Andrea and floreani, josanco, The Effects of Shariah Board Composition on Islamic Equity Indices' Performance (July 2018). Business Ethics: A European Review, Vol. 27, Issue 3, pp. 248-259, 2018, Available at SSRN: https://ssrn.com/abstract=3189109 or http://dx.doi.org/10.1111/beer.12185

M. Kabir Hassan (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Federica Miglietta

Università degli Studi di Bari “Aldo Moro” (UNIBA) - Department of Business Studies and Private Law ( email )

via Camillo Rosalba, 53
Bari, 70124
Italy

Andrea Paltrinieri

University of Verona ( email )

Via dell'Artigliere, 8
Verona, 37129
Italy

Josanco Floreani

Università degli Studi di Udine

Via Tarcisio Petracco, Palazzo antonini, 8
Udine, 33100
Italy

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