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The market uncertainty of ethically compliant equity: An integrated screening approach

Abu Bakar, Norhidayah; Abdelsalam, Omneya; Taamouti, Abderrahim; Elmasry, Ahmed

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Authors

Norhidayah Abu Bakar

Abderrahim Taamouti

Ahmed Elmasry



Abstract

This study investigates the uncertainty of market returns for ethically compliant equity using a comprehensive ethical screening methodology. The analysis also compares the effect of different ethical screening criteria on firm uncertainty. We develop a comprehensive ethical screening framework that fulfils the intrinsic value of the Islamic religion and responds to contemporary ethical challenges. Using the comprehensive framework, a global sample of non-financial companies are screened for their fulfilment of religious and ethical values. The framework is not only focused on basic screening methodologies that are currently used in the Islamic finance industry but also covers the aspect of environmental, social and governance (ESG) performance, as well as firms’ earnings qualities. The analysis reveals that ethically compliant firms display lower uncertainty than non-ethically compliant firms. The level of firm uncertainty is also different between the screening stages, where firms screened using a more comprehensive ethical approach are exposed to lower uncertainty. The results are robust to various estimations and consistent during the 2008 financial crisis.

Citation

Abu Bakar, N., Abdelsalam, O., Taamouti, A., & Elmasry, A. (2023). The market uncertainty of ethically compliant equity: An integrated screening approach. Journal of International Financial Markets, Institutions and Money, 86, Article 101759. https://doi.org/10.1016/j.intfin.2023.101759

Journal Article Type Article
Acceptance Date Mar 6, 2023
Online Publication Date Mar 10, 2023
Publication Date 2023-07
Deposit Date Jul 12, 2023
Publicly Available Date Mar 11, 2024
Journal Journal of International Financial Markets, Institution and Money
Print ISSN 1042-4431
Electronic ISSN 1873-0612
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 86
Article Number 101759
DOI https://doi.org/10.1016/j.intfin.2023.101759
Public URL https://durham-repository.worktribe.com/output/1168821
Related Public URLs https://livrepository.liverpool.ac.uk/3170131/

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