Title: Dividend policies of shariah-compliant and non-shariah-compliant firms: evidence from the MENA region

Authors: Omar Farooq; Oumkeltoum Tbeur

Addresses: Department of Business and Management, Aalborg University, Fibigerstræde 4, Aalborg 9220, Denmark ' School of Business Administration, Al Akhawayn University, P.O. Box 104, Hassan II Avenue, 53000 Ifrane, Morocco

Abstract: Do shariah-compliant firms pay higher dividends than other firms? Using data from the MENA (Morocco, Egypt, Saudi Arabia, UAE, Jordan, Kuwait, and Bahrain) region, this paper shows that shariah-compliant firms not only have higher payout ratios but also have higher likelihood to pay dividends than non-shariah-compliant firms during the period between 2005 and 2009. We argue that financial characteristics of shariah-compliant firms (i.e., low leverage, low account receivables, and low cash) are such that they pay higher dividends than their non-shariah-compliant counterparts. Furthermore, we also show that our results hold true in both legal regimes - the civil law countries and the common law countries.

Keywords: Islamic finance; Islam; shariah compliance; shariah-compliant firms; dividend policies; emerging markets; MENA region; Middle East; North Africa; Morocco; Egypt; Saudi Arabia; UAE; United Arab Emirates; Jordan; Kuwait; Bahrain; dividend payments.

DOI: 10.1504/IJEBR.2013.055537

International Journal of Economics and Business Research, 2013 Vol.6 No.2, pp.158 - 172

Published online: 30 Dec 2013 *

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