Capital Structure of Islamic Banks and its relationship with the Islamic Financial Development Indicator (IFDI)

• Autor(a) principal: Khatib, Ahmed Sameer El
• Data de Publicação: 2023
• Outros Autores: Poker Junior, Johan Hendrik, Carvalho, Allan Silva de
• Tipo de documento: Artigo
• Idioma: por
• Título da fonte: Revista Ciências Administrativas (Fortaleza. Online)
• Texto Completo: https://ojs.unifor.br/rca/article/view/13534
• topic: Islamic Finance; IFDI; Capital Structure; Financial Development; Finanças Islâmicas; IFDI; Estrutura de Capital; Desenvolvimento Financeiro; finanzas islámicas; IFDI; estructura capital; desarrollo financiero

The purpose of this article is to examine the effect of capital structure on the financial development of islamic banks. To measure the islamic development, it was used the Refinitiv Islamic Development Indicator® (IFDI) in countries level during the years 2014 to 2019. Using a sample of 105 banks covering banking systems in 19 countries with Muslim-majority, the study used a Two-Stage least squares (2SLS) regression to control for reverse causality from IFDI to capital structure. The non-monotonic net ratio found between financial development over equity and bank capital ratios suggests that stocks with low capital ratios (less than 48.42%) are expensive and have a negative effect on their development indicator. The result is consistent with the Signaling Theory, which predicts that better performing banks reliably transmit this information through higher capital. The article is justified by the international relevance of the topic and the beginning of discussions on the creation of the legal framework for Islamic Finance in Brazil, in April 2021, by the Economic Affairs Committee of the Federal Senate.