Islamic finance and market segmentation: Implications for the cost of capital

Bruce Hearn, Jenifer Piesse, Roger Strange

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)

Abstract

This paper considers the impact of full Islamic shari'ya compliance on developing stock exchanges in their effective provision of development capital. Evidence from a unique study focussing on the Sudan telecommunications company and its listings on the Khartoum as well as Arabian Gulf stock exchanges reveals that costs of capital are considerably higher in the former than latter markets. While there are firm governance benefits arising from Islamic finance monitoring costs are substantial and the banking system is better placed to administer financing arrangements. Larger firms are better placed to circumvent this segmentation through cross-listing on regional exchanges. (C) 2010 Elsevier Ltd. All rights reserved.
Original languageEnglish
Pages (from-to)102 - 113
Number of pages12
JournalInternational Business Review
Volume21
Issue number1
DOIs
Publication statusPublished - Feb 2012

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