TY - JOUR
T1 - The substitution hypothesis of agency conflicts
T2 - Evidence on Shariah compliant equities
AU - Azmi, Wajahat
AU - Anwer, Zaheer
AU - Mohamad, Shamsher
AU - Shah, Mohamed Eskandar
N1 - Publisher Copyright:
© 2019 Elsevier Inc.
PY - 2019/8
Y1 - 2019/8
N2 - According to the substitution hypothesis and recent evidence, firms that are better governed carry less debt and experience fewer agency problems. This may also imply that firms with lower debt are better governed and experience lower agency costs. We test this hypothesis by comparing the agency costs of Shariah compliant (SC, and therefore low debt) and Shariah noncompliant (SNC) firms, using a proprietary dataset comprising constituents of the Dow Jones Islamic index for the period 2006–2015. The findings support the hypothesis but are contingent on the firm's idiosyncratic risk; SC firms with low idiosyncratic risk have higher agency costs.
AB - According to the substitution hypothesis and recent evidence, firms that are better governed carry less debt and experience fewer agency problems. This may also imply that firms with lower debt are better governed and experience lower agency costs. We test this hypothesis by comparing the agency costs of Shariah compliant (SC, and therefore low debt) and Shariah noncompliant (SNC) firms, using a proprietary dataset comprising constituents of the Dow Jones Islamic index for the period 2006–2015. The findings support the hypothesis but are contingent on the firm's idiosyncratic risk; SC firms with low idiosyncratic risk have higher agency costs.
KW - Agency costs
KW - Capital structure
KW - Corporate governance
KW - Shariah compliant equities
KW - Stock screening
UR - http://www.scopus.com/inward/record.url?scp=85063089093&partnerID=8YFLogxK
U2 - 10.1016/j.gfj.2019.02.004
DO - 10.1016/j.gfj.2019.02.004
M3 - Article
AN - SCOPUS:85063089093
SN - 1044-0283
VL - 41
SP - 90
EP - 103
JO - Global Finance Journal
JF - Global Finance Journal
ER -