Dividend Signaling Hypothesis and Short-term Asset Concentration of Islamic Interest-free Banking ♣
Year: 2003
Type: article
Abstract: This paper finds that the dividend signaling hypothesis is able to explain the phenomenon of asset concentration in short- and medium-term investments in the Islamic interest-free banking system. To maintain a stable dividend payout, managers of Islamic banks will prefer to invest in instruments with more certain returns. This leads to concentration in short and medium term mark-up based investments. Our results show that dividends in Islamic banks are stable. Bank earnings are a major source of this stability. We also find that short- and mediumterm investments are more important in generating earnings than long-term investments.
Institutions: LSU New Orleans, Central Connecticut State University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2235392415