Purpose This study aims to examine the efficacy of integrating machine learning (ML) architectures and feature selection protocols within a traditional asset pricing framework to enhance equity return predictability. Design/methodology/approach Leveraging a methodological pipeline that synergizes artificial neural networks (ANN) with sequential feature selection (SeFS) and Least Absolute Shrinkage and Selection Operator (LASSO) regularization, this study analyzed the momentum, value and quality risk premia across 949 conventional and 621 Islamic equities in the Indonesian market from 2016 to 2025. To isolate robust signals, this study further uses complete ensemble empirical mode decomposition with adaptive noise (CEEMDAN) for price denoising. Findings Empirical results indicate that momentum factors, particularly those with a one-month horizon, exhibit superior predictive power. Feature selection consistently identifies one-month momentum, earnings-to-price and gross profit-to-total assets as primary predictors. Notably, Islamic equities exhibit greater sensitivity to valuation anomalies, with EBIT/EV and gross profit-to-enterprise value providing additional predictive power. The ANN models achieve robust forecasting performance, with forecasting performance metrics ranging from 70% to 85%. The predictive outcomes exhibit significant invariance to the number of hidden layers, suggesting that factor risk premia possess an inherent structural stability that is not materially enhanced by increasing the complexity of the deep network. Practical implications The findings provide actionable insights for portfolio managers, Islamic fund managers and quantitative investors by demonstrating that ML models combined with factor investing strategies can substantially improve equity return forecasting in emerging markets. The study also highlights the relevance of short-term momentum and value-related factors for Islamic equities, supporting the development of more efficient Shariah-compliant investment strategies and AI-driven portfolio allocation systems. Originality/value This study advances the asset pricing and Islamic finance literature by integrating ANN, SeFS, LASSO and CEEMDAN within a unified equity return forecasting framework. It provides novel comparative evidence from 949 conventional and 621 Islamic Indonesian equities, highlighting the predictive dominance of short-term momentum and value-related factors. The findings also reveal the structural stability of factor risk premia across different neural network complexities in an emerging market context.
Purpose This study aims to examine the dynamic relationship between conventional, Islamic and ESG stock returns, and various financial, non-financial and policy-related uncertainties. Additionally, the study examines the hedging potential and interconnectedness of these indices under varying market conditions. Design/methodology/approach The study uses a novel method of quantile coherency, introduced by Baruník and Kley (2019), which facilitates in-depth analysis of the dependence structure across quantiles and frequencies. It enables the identification of co-movement patterns among stock returns and uncertainty measures in both standard and extreme market conditions. Additionally, this study uses impulse response functions and dynamic conditional correlation (DCC)-GJR-GARCH approaches for robustness. Findings The results indicate a positive connection between the returns of these stock indices and non-financial uncertainty, particularly in the extreme low and high quantiles over yearly periods, highlighting the effective hedging capability of different stock indices against geopolitical risks. Regarding policy-related uncertainty, the authors observe a significant positive correlation between these stock indices and economic policy uncertainty, particularly at the monthly frequency during bearish market conditions. Furthermore, most conventional, Islamic and ESG stock returns exhibit a negative correlation with financial uncertainties, indicating a lack of effectiveness in hedging against crude oil volatility and implied stock volatility. The robustness of these findings is checked by time-varying correlation (DCC-GJR-GARCH) analysis. Originality/value The results have significant implications for investors, portfolio managers, and policymakers, particularly those seeking to construct a portfolio suitable for all market conditions. This study is among the first to apply quantile coherency analysis to explore how Islamic, ESG and conventional stock markets respond to a broad spectrum of uncertainties.
Purpose This study aims to examine customer loyalty (CL) formation within a highly regulated Islamic banking environment. It investigates how regulatory pressure (RP), bank trust (BT) and perceived lack of alternatives (PLA) jointly shape CL in a structurally constrained financial system, using Aceh, Indonesia, as a unique empirical context where Islamic banking operates as the dominant and institutionally embedded system. Design/methodology/approach Drawing on institutional theory and relationship marketing perspectives, this study uses a quantitative research design using survey data from 355 Islamic banking customers in Aceh. The proposed conceptual model is tested using partial least squares structural equation modeling to assess direct, mediating and moderating relationships among the key constructs. Findings The results show that RP is positively associated with BT and also has a direct effect on CL. BT significantly influences CL, highlighting its role as a key relational mechanism in an institutionalized banking environment. PLA also shows a positive relationship with CL, indicating that structural conditions contribute to continued customer engagement. However, the moderating effect of PLA is not supported, suggesting that relational and structural mechanisms operate as distinct pathways in shaping loyalty outcomes. Research limitations/implications The cross-sectional design and single-region context limit the generalizability of the findings. Future research may use longitudinal and cross-country designs to further examine CL under different institutional and regulatory settings. Practical implications The findings suggest that although regulatory frameworks contribute to BT and customer retention, sustainable CL requires complementary managerial efforts such as service-quality improvement, customer experience enhancement and digital innovation. This is important to ensure that loyalty is reinforced through relational mechanisms rather than relying solely on structural conditions. Originality/value This study contributes to the literature by providing empirical evidence on how established relational mechanisms (BT) and structural conditions (PLA) jointly shape CL within Aceh’s mandatory Islamic banking system. Rather than proposing a new theoretical perspective, the study extends the empirical application of institutional theory and relationship marketing by demonstrating how these established mechanisms operate in a fully regulated Islamic banking environment where conventional banking alternatives are effectively absent.
Purpose This study aims to examine the relationship between Islamic financial development (IFD) and renewable energy consumption (REC) within the framework of the financial environmental kuznets curve (FEKC) hypothesis for selected Organization of Islamic Cooperation (OIC) member countries. This study also aims to determine whether the impact of IFD on REC follows a nonlinear pattern and whether threshold effects exist. Design/methodology/approach Using annual data for seven OIC countries (2013–2024), the study uses Islamic banking total assets (ITA) and Islamic banking financing (IBF) as proxies for IFD. The empirical approach combines panel estimations, nonlinear models and panel quantile regression. Model selection relies on standard tests, with Hadri Lagrange Multiplier and multicollinearity checks. Given few clusters, inference uses HC1–Arellano robust errors and Wild Cluster Bootstrap. Findings The findings reveal the existence of a statistically significant and nonlinear relationship between IFD and REC. Across all model specifications, including robust panel estimations (ITA and IBF), the quadratic terms are found to be significant, thereby confirming a U-shaped relationship. The fact that the estimated turning points lie below the range of observations indicates that all OIC countries in the sample are positioned along the upward-sloping segment of the curve. Furthermore, panel quantile regression results demonstrate that this effect is statistically significant only in countries with higher levels of REC (τ = 0.75), thereby supporting the FEKC hypothesis at the upper tail of the distribution. The robustness of these findings is further validated through the application of Wild Bootstrap and HC1 corrections. Research limitations/implications This study is subject to limitations in terms of generalizability due to the small number of countries (n = 7) and the short time dimension (T = 12). Future research could extend these findings by using a broader sample of OIC countries. From a policy perspective, the results indicate that Islamic finance can effectively support the transition to renewable energy only after reaching a sufficient threshold of financial deepening. Therefore, in countries with low levels of REC, the development of green sukuk and Islamic climate finance mechanisms may be considered a priority policy instrument. Originality/value To the best of the authors’ knowledge, this study is among the first to examine the relationship between IFD and REC within a nonlinear framework using panel quantile regression. It offers an original contribution by simultaneously testing the FEKC hypothesis for OIC countries through both total ITA and IBF indicators. The application of Wild Bootstrap and HC1 corrections strengthens methodological rigor, while the distributional approach provides novel insights for policy design across heterogeneous country structures.
Purpose The integration of sustainability, finance, digital technologies and industrialization has become crucial for achieving the Sustainable Development Goals (SDGs). However, the literature has overlooked the role of sustainable industrialization and Islamic finance (aligned with various SDGs), particularly in advancing climate action (SDG 13). The purposes of this study is to use Sukuk holdings as a proxy for Islamic finance, sustainable industrialization (SDG 9) and digital technology to examine their effects on consumption-based carbon emissions (CCO2e). Design/methodology/approach The study uses annual data for 12 emerging OIC countries with a dual banking system and uses the Driscoll–Kraay standard error method to obtain long-run estimates, addressing potential issues of cross-sectional interdependence, heteroscedasticity and serial correlation. Findings Empirical findings indicate that Islamic finance and sustainable industrialization help reduce CO2e, suggesting their imperative role in improving environmental quality. Further, an inverted U-shaped link between per capita income and CCO2e confirmed the Environmental Kuznets Curve (EKC). A similar inverted U-shaped pattern appears between digitalization and CCO2e that supports the Kuznets Curve premise. These results imply that, initially, digitalization increases energy use because of infrastructure and the use of digital devices information and communication technologies (ICTs). Once a threshold is reached, digitalization development enhances energy efficiency, enabling digital substitution and better resource management, which may reduce emissions. Instead, the effect of energy use on CCO2e is significant and positive, suggesting an increase in pollution. Research limitations/implications This research covers a limited number of OIC countries and focuses on Islamic finance. Also, data on green Sukuk, which offer an effective sharia-compliant solution by mobilizing funds for environmentally sustainable projects, is not available for most of the OIC. Future research venues can address the defined gap once the data are readily available. Practical implications The outcomes of this study offer important implications for policymakers, bank regulators and practitioners. Based on the findings, there is a call to expand Islamic finance, which supports sustainable projects and renewable energy. The OIC governments should adopt appropriate measures to allocate these funds to sustainable activities, with a view to boosting economic growth and people’s well-being by implementing sustainable/green projects in those climate-risk and vulnerable Islamic countries. Originality/value This study introduces Sukuk holdings as a proxy for Islamic finance, along with sustainable industrialization, to investigate their impact on CCO2e. This environmental indicator remains largely unexplored in the finance literature.
Purpose This study aims to investigate the behavioral factors influencing Muslim investors’ intention to invest in Bitcoin within a country recognized for its leadership in both Islamic finance and FinTech innovation. Despite ongoing debates surrounding the Shariah compliance of cryptocurrencies, Bitcoin has gained traction as a speculative investment asset. Yet, little empirical research has examined how Muslim investors reconcile religious principles with high-risk digital assets. Addressing this gap, this study integrates the theory of planned behavior, the technology acceptance model and the innovation diffusion theory into a unified framework encompassing eight behavioral constructs: profitability, trust, risk tolerance, awareness, subjective norms, compatibility, facilitating conditions and ease of use. Design/methodology/approach Data were collected via a structured survey and analyzed using Partial Least Squares Structural Equation Modeling. Findings The results reveal that profitability, trust, awareness and risk tolerance are significant predictors of Bitcoin investment intention, whereas subjective norms, compatibility with Islamic finance, facilitating conditions and ease of use are not. These findings suggest a shift toward more individualistic, market-driven investment behavior among Muslim investors, where financial incentives and personal confidence outweigh traditional religious or institutional influences. Originality/value This research contributes to the literature by contextualizing established behavioral finance theories within an Islamic finance setting and highlighting the evolving dynamics of investor behavior in Muslim-majority environments. The findings carry important implications for regulators, financial institutions and investment advisors, particularly in the development of Shariah-compliant investment products, risk management tools and targeted financial education initiatives.
Purpose The purpose of this paper is to examine the determinants of commercial bank lending rates in the Maldives using quarterly data from 2015Q4-2024Q4. The authors analyze whether government debt, savings, recovery rates and inflation exert nonlinear effects on lending behavior while controlling for liquidity, credit risk and market concentration.Design/methodology/approach This study applies the time-series threshold regression framework.Findings Results reveal strong threshold effects. Lending rates decline when debt remains below 68.7% of GDP and when savings, recovery performance and moderate inflation improve financial conditions. Economic significance analysis indicates that savings mobilization has the largest impact: a five-percentage-point increase reduces lending rates by over three percentage points, followed by inflation, debt and liquidity effects. Beyond thresholds, impacts weaken considerably.Practical implications The findings highlight the importance of coordinated fiscal discipline, domestic savings deepening and liquidity management to sustainably lower borrowing costs and strengthen financial intermediation in the Maldives. These findings may also be useful for other Islamic economies with similar financial and institutional environments.Originality/value Existing studies on lending rate determinants largely rely on linear frameworks. This study contributes by using a threshold approach to uncover the nonlinear effects of key structural factors on lending rates. By empirically identifying five structural inefficiencies in the Maldives, the analysis provides new insights on the persistence of high lending rates.
Purpose This study aims to investigate the impact of Sharia Supervisory Board (SSB) effectiveness on a multidimensional financial framework comprising liquidity, risk and market dynamics. Moving beyond linear relationships, the research explores how SSB functions as a dynamic capability resource (DCR) that enables Islamic banks in Gulf Cooperation Council (GCC) countries to navigate various operational regimes. Design/methodology/approach Using a quantitative approach, the study uses an extensive data set from Islamic banks across GCC countries (2018–2024). SSB effectiveness is measured through sharia educational background, meeting frequency, board size and independence. The “Three Regime Model” integrates liquidity (funding ratios), risk (asset quality/volatility) and market performance (market share/returns). To capture the dynamic nature of these resources, the study applies panel data analysis with an emphasis on regime-switching or threshold effects to identify how SSB influence shifts across different financial states. Findings The results demonstrate that effective SSBs serve as a critical dynamic capability, significantly enhancing the nexus between liquidity, risk management and market positioning. The findings reveal that the influence of SSB is not uniform but varies across different regimes; it is most potent in stabilizing the risk-liquidity trade-off during volatile market conditions. This confirms that ethical governance acts as a resource-reconfiguration mechanism that fosters institutional resilience and adaptive capacity in the GCC Islamic banking sector. Research limitations/implications This study provides a novel theoretical bridge between Sharia governance and the dynamic capability view. For regulators, the findings suggest that SSB mandates should evolve from simple compliance oversight to strategic resource roles. Strengthening the SSB’s capacity to manage the “three-regime” complexities is essential for maintaining systemic stability in Sharia-compliant financial ecosystems. Practical implications These insights assist Islamic bank managers in leveraging the SSB as a strategic asset to optimize liquidity and mitigate risk. By understanding the regime-dependent nature of governance effectiveness, banks can better align their ethical structures with market demands to improve long-term financial endurance. Originality/value This research offers a pioneering perspective by introducing the “Three Regime Model” within Islamic finance literature. It departs from traditional isolated variable analysis by integrating liquidity, risk and market factors under the lens of DCRs, providing a more holistic and realistic understanding of Sharia governance in the GCC region.
Purpose This study aims to examine the impact of Islamic finance and digitalization on economic growth, measured by real GDP growth, focusing on Islamic banking development, sukuk issuance and digital investment while controlling for governance effectiveness and inflation.Design/methodology/approach The study uses a balanced macropanel of six leading Islamic Finance Development Indicator (IFDI) countries over 2015-2024. A fixed-effects model with Driscoll-Kraay standard errors is used to address heteroskedasticity, serial correlation, cross-sectional dependence and common global shocks. A robustness test excluding the COVID-19 year (2020) is conducted to verify result stability.Findings Islamic banking development and sukuk issuance do not show statistically significant short-run effects on economic growth after controlling for country and time effects. In contrast, digitalization shows a positive and highly significant association with economic growth, indicating that technological investment may function as an important structural factor related to growth. Governance effectiveness and inflation are not significant, suggesting they function primarily as enabling conditions rather than immediate growth drivers.Practical implications Policymakers should prioritize digital transformation through ICT infrastructure, digital public services and innovation ecosystems. Islamic finance development should focus not only on expanding financial assets but also on strengthening productive financing, risk-sharing instruments and linkages with the real economy.Originality/value This study integrates Islamic finance, digitalization and institutional quality within a unified macropanel framework for leading IFDI countries, highlighting the central role of technological transformation in supporting economic growth.
Purpose This study aims to explain why a stated willingness to return to entrepreneurship after failure does not always translate into actual re-entry. It conceptualises suspended return as an intermediate post-failure state and compares its prevalence and drivers across Saudi Arabia, Qatar and the United Arab Emirates (UAE). Design/methodology/approach A comparative mixed-method design combines a survey of 450 entrepreneurs who experienced business closure in the previous five years (150 per country) with 30 semi-structured interviews. Descriptive comparisons are followed by PLS-SEM estimated on the sub-sample that remained oriented towards return (n = 317). Findings Actual re-entry reaches 71.3% in the UAE, 52.0% in Qatar and 38.0% in Saudi Arabia. Amongst entrepreneurs still oriented towards return, conversion into actual re-entry equals 85.6%, 74.3% and 65.5%, respectively. Conversion is more strongly associated with disclosure safety, support activation, visible institutional second-chance pathways and lower fear-based hesitation than with an abstract capacity to bounce back. Research limitations/implications This study is limited by cross-sectional, self-reported data, purposive network-based sampling that may under-represent entrepreneurs least willing to disclose failure and a conversion measure that captures realised re-entry versus active planning but not the quality or durability of the new activity. Its main research implication is that second-chance entrepreneurship should be analysed as a conversion problem, distinguishing post-failure psychological resources, re-entry preparedness and realised re-entry. By formalising suspended return, the paper opens a stronger agenda for longitudinal, time-to-event and subgroup research across Gulf and other emerging-economy settings. Practical implications Entrepreneurial ecosystems should monitor not only start-up creation but also second-chance conversion from return orientation to actual re-entry. Public programmes and support organisations need to make post-failure pathways visible, credible and socially usable. In Saudi Arabia, priorities include confidential mentoring, diagnostic support and trusted post-failure accompaniment; in Qatar, clearer and more navigable pathways; in the UAE, broader inclusion beyond the most visible founders. Incubators, accelerators, development banks and financiers can reduce suspended return through phased funding, transparent re-admission criteria and dedicated post-failure mentoring spaces. Social implications By showing that many failed entrepreneurs remain oriented towards return yet do not act, the study reframes failure as a socially mediated transition rather than a personal endpoint. Reducing stigma, increasing disclosure safety and normalising second-chance entrepreneurship can help founders seek support earlier and re-engage more confidently. More discussable and socially legitimate failure can improve inclusion, reduce exclusion after business closure and keep capable entrepreneurs connected to entrepreneurial ecosystems. These effects matter especially where reputational concerns and fear of judgement keep entrepreneurs in suspended return rather than allowing preparedness to become actual re-entry. Originality/value The paper distinguishes post-failure psychological resources, re-entry preparedness and realised re-entry, and introduces suspended return as a substantive empirical category. It reframes second-chance entrepreneurship as a conversion problem rather than a simple resource-availability problem.
Purpose This study aims to examine the effect of firm leverage on systematic risk between conventional and Shariah-compliant firms listed on the Canadian stock exchanges. Covering the period from 2017 to 2022, the research aims to assess the implications of Shariah-compliant strategies for portfolio performance over periods of normal and high volatility during COVID-19.Design/methodology/approach With a sample of 412 firms, the study uses dynamic panel generalized method of moments estimation and the mean-variance efficient frontier framework to evaluate the risk-return profile of Shariah-compliant firms. These methodologies enable a robust analysis of systematic risk and reward-to-risk ratio, offering insights into the performance of Shariah-compliant portfolios under time-varying leverage conditions.Findings The results reveal that Shariah-compliant portfolios generally exhibit lower systematic risk compared to their conventional counterparts because of their low-debt ratio. Additionally, these firms demonstrate a superior reward-to-risk ratio and a more favorable risk-return profile, especially during periods of economic instability. The findings highlight the effectiveness of Shariah-compliant portfolios in optimizing portfolio performance and managing risk.Originality/value This study contributes to the literature by emphasizing the distinctive risk management characteristics of Shariah-compliant firms and their potential to enhance portfolio diversification. The findings underscore the value of Shariah-compliant investment strategies for investors seeking to mitigate risk and improve risk-adjusted returns, particularly in volatile economic environments.
Purpose This study aims to explore how corporate culture influences green environmental innovation and assesses its impact on Shariah financial performance within Islamic financial institutions. Design/methodology/approach A survey of 270 managers from institutions in Banten, Jakarta and West Java, Indonesia, was conducted. Data were analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM) to test relationships between four culture types - clan, adhocracy, hierarchy and market - green innovation dimensions (organizational practices, processes and products), and financial performance. Findings The results indicate that adhocracy and market culture significantly promote green innovation, while clan culture has a weaker yet positive effect. Conversely, hierarchy culture negatively affects all innovation dimensions. Green organizational practices, processes and products positively contribute to Shariah financial performance, suggesting that flexible and market-oriented cultures help align sustainability with financial objectives. Practical implications From a practical perspective, managers are encouraged to foster innovation-friendly environments, align market-driven incentives with environmental goals and revise rigid internal structures. Recommended mechanisms include cross-functional green teams, eco-compliance key performance indicators and integrating maqashid-al-shariah principles into environmental strategies. Originality/value This study advances the Islamic finance and sustainability literature by empirically connecting culture, innovation and performance, and offers practical strategies for embedding environmental innovation within Shariah-compliant financial operations.
Purpose This study aims to investigate the impact of fintech development on banking stability in selected Middle East and North Africa (MENA) countries. It assesses whether fintech adoption enhances financial resilience through innovation and improved financial inclusion, or whether it introduces additional sources of risk within the banking sector. Design/methodology/approach The analysis is based on a balanced panel data set of 67 commercial banks over the period 2011-2023. Fintech development is proxied by three indicators: regulatory sandboxes, fintech companies (FTC) and fintech transactions (FTT), while banking stability is measured using the LZ-score. The empirical framework combines static and dynamic panel models to account for persistence and potential endogeneity. The results are further supported by a series of robustness checks, reinforcing the reliability and validity of the findings. Findings The results indicate that fintech development is positively associated with banking stability across the full sample. In particular, the presence of FTC significantly enhances operational efficiency and service diversification, thereby strengthening financial resilience. However, the positive effect of FTT is more pronounced in high-income countries, reflecting the role of advanced financial and digital infrastructures in amplifying the benefits of fintech adoption. Originality/value This study provides new empirical evidence on the fintech-stability nexus in the MENA region. By highlighting the conditional nature of this relationship across different institutional contexts, it contributes to the literature on financial intermediation and digital transformation. The findings also offer policy-relevant insights for regulators seeking to promote innovation while preserving financial stability.
Purpose This paper aims to examine the symmetric and asymmetric conditional impacts of policy uncertainty on CO2 emissions within Gulf Cooperation Council (GCC) economies. Design/methodology/approach The study uses second-generation techniques, specifically designed to control cross-sectional dependence, heterogeneity and unobserved common factors. Additionally, bootstrap quantile regression is used to identify the environmental impacts of policy uncertainty across different levels of environmental deterioration (low, moderate and high). The method of moments quantile regression (MMQR) and Bayesian quantile regression are implemented to confirm the reliability of the findings. Finally, a Leave-One-Country-Out analysis is conducted to address potential size-related bias. Findings The empirical investigation reveals heterogeneous linkages between policy uncertainty and environmental quality. The pooled mean group estimator reveals that policy uncertainty lowers emissions. The bootstrap quantile regression shows that in nations with high initial CO2 emissions, a 1% change in uncertainty results in a 0.14% to 0.24% fall in emissions. The asymmetric analysis further indicates that positive and negative policy uncertainty shocks are inversely related to CO2 emissions; however, the emissions response is stronger to declines in policy uncertainty than to increases. The MMQR and Bayesian quantile regression results strongly confirm these findings. Once Saudi Arabia is excluded from the sample, emissions in other countries become more sensitive to uncertainty at the upper quantiles, while the environmental repercussions of uncertainty at the lower and medium quantiles become statistically significant. Originality/value The findings provide policymakers with actionable guidance to design effective strategies to curb environmental degradation amid policy uncertainty in the GCC.
Purpose This paper aims to examine the effectiveness of conventional monetary policy tools in the Maldives, with a focus on the indicative policy rate (IPR) and the minimum reserve requirement (MRR), in influencing output, inflation and credit in a small, open and fiscally constrained economy. Design/methodology/approach The study employs a Structural Vector Autoregression framework using quarterly data from 2012Q1 to 2024Q4. Monetary policy transmission is assessed through interest rate, credit and exchange rate channels. To capture overall policy stance in a multi-instrument framework, a Composite Monetary Policy Stance Index and an Effective Interest Rate are constructed and incorporated into the analysis. Findings The results indicate that monetary policy transmission in the Maldives is weak. The interest rate and exchange rate channels are largely inoperative. While the MRR exhibits a modest and relatively stronger short-run influence on private sector credit and lending rates compared to the IPR, its effects on output and inflation remain limited. The composite indicators confirm that structural constraints dominate the transmission mechanism. Practical implications From a policy perspective, the findings suggest that strengthening monetary transmission in the Maldives requires structural reforms, improved liquidity management and closer coordination between fiscal and monetary authorities. Originality/value The paper provides tool-based empirical evidence from a small island economy and introduces composite policy stance measures, contributing to the limited literature on monetary policy effectiveness under structural and fiscal constraints.
Purpose This study aims to investigate whether corporate Zakat contributions enhance firms’ commitment to the United Nations sustainable development goals (SDGs). It further examines how internal sustainability governance, specifically the corporate social responsibility (CSR)/ sustainability committee, moderates the relationship between Zakat intensity and overall SDG engagement. Design/methodology/approach Using an unbalanced panel of 334 Saudi non-financial listed firms from 2015 to 2024, a composite SDG disclosure index was constructed based on six SDGs (SDG 1, SDG 2, SDG 3, SDG 8, SDG 10 and SDG 17). The study applies a two-step system generalized method of moments estimator to address endogeneity, unobserved heterogeneity and dynamic persistence in SDG reporting. Moderation effects are tested by introducing an interaction term between Zakat intensity and CSR/ sustainability committee. Findings The results show that Zakat intensity has a positive but limited direct effect on SDG engagement. However, the moderating effect of the CSR sustainability committee is strong and highly significant, indicating that firms with established CSR governance structures are more capable of translating Zakat contributions into substantive SDG commitments. Robustness tests using environmental, social and governance components and CSR reporting confirm the central role of governance mechanisms in shaping this relationship. Practical implications The findings indicate the need for firms to institutionalize CSR governance structures to maximize the developmental impact of Zakat and strengthen alignment with national sustainability goals. Social implications The study shows that Zakat can serve as an effective instrument for advancing the SDGs when embedded within structured corporate governance systems. Originality/value This study extends the literature on Islamic social finance through an analysis of how corporate Zakat interacts with internal sustainability governance to influence SDG disclosure at the firm level. It contributes to the literature by integrating Maqasid al-Shariah principles with corporate sustainability practices and offering evidence from a mandatory Zakat environment.
Purpose This study aims to examine the complex, nonlinear relationship between climate risk and bank liquidity creation (LC) in the Middle East and North Africa (MENA) region, a climate-vulnerable area where this channel remains largely unexplored. Design/methodology/approach The authors apply a novel dual threshold–quantile method, complemented by a quantile-on-quantile approach, to a panel data set of 126 banks in 19 MENA countries over 2006–2022. This methodology allows us to identify critical risk thresholds and capture heterogeneous effects across the entire distribution of liquidity creation. Findings The results reveal a threshold-dependent relationship: climate risk exerts a positive and significant influence on bank LC, but only after surpassing a critical level of risk exposure. Furthermore, this positive effect is heterogeneous and is most pronounced for banks with moderate, rather than low or high, levels of preexisting liquidity creation. Research limitations/implications The findings highlight that policymakers and financial regulators must account for nonlinearities and distributional heterogeneity. Climate risk should be integrated into financial stability frameworks not as a linear threat, but as a potential trigger for complex behavioral shifts that can expand liquidity under specific high-risk conditions. Originality/value This paper provides the first empirical evidence of a nonlinear climate risk−LC nexus in the MENA region. By moving beyond linear models and a narrow credit focus, the authors demonstrate that banks can paradoxically expand systemic liquidity in high-climate-risk regimes, driven by precautionary savings and flight-to-quality behavior.
PurposeThis paper aims to evaluate the impact of an "Islamic bank only" policy in the Aceh region, Indonesia, which allows only Islamic banks to operate in the region starting from 2019, on the region's financial and economic developments.Design/methodology/approachThis paper use the synthetic control method (SCM) to measure the causal impact using data from the other 33 provinces in Indonesia, appropriately weighted to form a control region mimicking Aceh without the policy. Robustness is tested via placebo and leave-one-out analyses. This paper supplements this with a discussion of comparative natural experiment insights from other provinces and countries.FindingsThe findings indicate that the Islamic banks-only policy has had a significant negative impact on short-term financial development in the region. The policy adversely affects all four financial development outcomes - the Gross Regional Domestic Product (GRDP) of the financial sector, the ratio of credit to GRDP, the ratio of investment to GRDP and total savings. However, among the three economic development outcomes analyzed, only labor income has shown some negative impact of the policy, while the poverty rate and overall GRDP has not yet been affected.Practical implicationsGiven the legally entrenched nature of the policy, the findings point to the urgent need for complementary, strengthening measures. Recommendations include incentivizing the expansion and product diversification of Islamic banks - particularly into risk-sharing instruments - enhancing financial literacy, attracting new Islamic financial entrants and developing targeted credit programs for rural and MSME sectors to mitigate the observed negative effects on credit and savings.Originality/valueTo the best of the authors' knowledge, this is the first study to apply the SCM to assess the causal impacts of implementing an Islamic bylaw policy on the financial and economic performance of a specific region in a large developing country. It integrates this with comparative lessons from other Islamic banking transitions.
Purpose This study aims to develop a conditional framework to examine how policy uncertainty influences monetary holding behavior across different financial environments in the 17 Middle East and North Africa (MENA) countries classified during the period 1994–2024. Design/methodology/approach The study uses a comprehensive measure of policy uncertainty that captures uncertainty arising from both economic and political events. To estimate the augmented money demand function, the study applies advanced heterogeneous panel estimators, including the common correlated effects mean group and augmented mean group, complemented by panel dynamic ordinary least squares (OLS) and two-stage least squares techniques, to account for cross-sectional dependence, parameter heterogeneity and potential endogeneity. Findings The findings indicate that policy uncertainty compresses domestic liquidity holdings, with the magnitude of this effect varying across financial systems across the 17 countries in the MENA region. The estimates lend support to the long-lasting association between money demand and its main drivers. Importantly, the results represent that financial development (FD) significantly mitigates the negative impact of policy uncertainty, highlighting its role as a stabilizing factor in monetary dynamics. The results show that FD fundamentally reshapes how uncertainty affects liquidity preferences. Research limitations/implications One limitation of this study is the required 30-year time period for sufficient data to be available. This is considered one of the most important limitations the authors faced in this study. Practical implications The findings imply that FD should be viewed not only as a long-term growth objective but also as a monetary stabilization tool. In environments characterized by recurrent policy uncertainty, financial deepening reduces the sensitivity of money demand to shocks, thereby enhancing the reliability of monetary aggregates as policy instruments. The findings may guide the formulation of monetary policy strategies by the central banks of the MENA region countries. Originality/value This study contributes to the monetary economics literature by demonstrating that the association between policy uncertainty and money demand is not structurally invariant across financial systems. By conceptualizing FD as a structural moderating mechanism rather than a conventional control variable, this study introduces a conditional framework that advances the existing conditional monetary behavior model. This insight extends beyond the regional context and offers broader implications for how central banks in developing and emerging economies can enhance monetary resilience in uncertain environments.
