Islamic corporate finance: Capital structure

Mohamed Eskandar Shah Mohd Rasid, Ajim Uddin, Mohammad Ashraful Ferdous Chowdhury

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

The capital structure choices of a firm not only determine the current value of the firm, but also largely determine its long-term survival. Modigliani and Miller’s seminal 1958 paper explicates conventional firms’ capital structure choices. However, we are yet to develop a solid theoretical framework about the financing decisions of Islamic firms. This is a review chapter on current developments in the field of Islamic capital structure. The chapter starts with a short discussion about the various sources of capital and their advantages and disadvantages, followed by a detailed description of traditional capital structure theories and their real-world empirical evidence. Finally, it discusses how the capital structure decision for Islamic firms differs from that for conventional firms, and the role sukuk, dual-banking system, and debt threshold play in determining Islamic firms’ capital structure.

Original languageEnglish
Title of host publicationIslamic Corporate Finance
PublisherTaylor and Francis
Pages54-73
Number of pages20
ISBN (Electronic)9781351061490
ISBN (Print)9781138480919
DOIs
Publication statusPublished - 4 Jun 2019
Externally publishedYes

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