Muslim Business and Economics Review

Investor Sentiment and Stock Return Volatility: Implication of The Israel-Palestine Conflict on Sharia Stocks in Indonesia

2024-12-29T00:19:17+00:00

The escalation of the Israel-Palestine conflict has garnered global attention. Public condemnation through mass boycotts of pro-Israel products has significantly impacted capital markets, particularly the sharia stock market in countries with Muslim majority populations. The volatility of sharia stock returns becomes a crucial focal point in this context as it serves as a sensitive indicator of geopolitical events and changes in investor sentiment. This study investigates the connection between the volatility of sharia stock returns in Indonesia and investor sentiment as a result of the Israel-Palestine conflict. Researchers use the GARCH (1,1) model to look at how investor sentiment and the conflict between Israel and Palestine affect the volatility of Sharia stock returns indexed by the Jakarta Islamic Index (JII), using monthly data from January 2012 to February 2024. The researchers hypothesized that investor sentiment and the Israeli-Palestine conflict affect Islamic stock returns in Indonesia, but the results of this study show that the two factors have no effect on Islamic stock returns. The findings of this research provide valuable insights for financial market practitioners, investors, and regulators in understanding the impact of geopolitical conflicts on the capital market, particularly in the context of sharia stocks in Indonesia. By considering investor sentiment factors and market fluctuations triggered by such geopolitical events, this study provides a stronger foundation for wise investment decision-making and effective risk management, thereby enhancing the stability and performance of sharia capital markets in the future.

Technical Efficiency Performance of Halal Food and Beverages Companies in Indonesia and Malaysia

2024-12-29T00:19:18+00:00

Indonesia and Malaysia are among the top most influential countries globally for halal food and beverages (HF&B). As a result, there is a perception that these nations’ HF&B companies are mature enough to have robust operational and managerial systems. This leads to a question on how HF&B companies handle unprecedented events. This paper examines the efficiency of HF&B companies, proxied by technical efficiency (TE) score in Indonesia and Malaysia over a five year period – covering the pre-COVID-19 period (2018-2019) and during the pandemic (2020-2022) –using Stochastic Frontier Analysis. The findings indicate that Indonesia's HF&B perform better over the period by showing 60% TE, whereas Malaysia's was at 50%. Interestingly, Malaysia's TE slightly increased during the COVID outbreak, whereas Indonesia showed a reverse pattern, with decreasing TE during the first year of the pandemic. Furthermore, both countries’ HF&B require further improvement, as because between 40% and 50% of the production input is inefficient, which means the production outputs are not optimal for profit. The significant factors requiring improvement from industry players are managing the cash and inventory cycle, along with adding or upgrading any necessary fixed assets such as equipment to reach productivity at an optimum level. This findings also indicate the benchmark for the HF&B industry as well as the current stage for competitiveness among the countries.

Investigating Determinants of Intention in Cash Waqf Linked Sukuk for Sustainable Agriculture: The Moderating Role of Environmental Awareness

2024-12-29T00:19:18+00:00

The role of cash waqf linked sukuk (Islamic bonds linked to endowments) should be developed to enhance the green economy, particularly in the sustainable agriculture sector. This study investigates the influence of Islamic religiosity, knowledge, and trust in nazhir (waqf managers) on the intention to engage in cash waqf linked sukuk transactions for sustainable agriculture. This study also analyzes the moderating role of environmental awareness as an important factor in the green economy. Primary data was collected through questionnaires disseminated to 150 respondents and Partial Least Squares Structural Equation Modeling (PLS SEM) was employed to analyze the data. The findings indicate that environmental awareness and trust nazhir are significant determinants of the intention to engage in cash waqf linked sukuk transactions for sustainable agriculture. Environmental awareness is also found to be significant in moderating the influence of Islamic religiosity. The implications suggest that to enhance community participation in cash waqf linked sukuk for sustainable agriculture, it is imperative to build trust in nazhir, increase environmental awareness, and target individuals who uphold Islamic values.

Does FDI Matter for The Economic Growth of West Sub-Saharan African Countries? A Panel Vecm Approach

2024-12-29T00:19:18+00:00

This study analyzes foreign direct investment (FDI) and economic growth in fifteen West Sub-Saharan African countries’ relationship from 1990 to 2020, with secondary panel data from the World Bank (2022), at the expense of both interest rate and exchange rate effect. The main model used is Panel VECM. The results shows that FDI helps enhance economic growth in the long run, as the estimate in the long-run indicates an increase of -121.16, which can be interpreted inversely with a 1% level of significance, with t-statistics at -14.94, despite FDI’s negative impact in the short run with an estimate of -3.5 with a level of significance of -2.16. Likewise, the effect of interest rate with t-statistics of -0.1 for economic growth and 0.1 for FDI and exchange rate with t-statistics of -0.43 for economic growth and -0.12 for FDI. Thus, both parameters are deemed insignificant. Therefore, policymakers should adopt policies that will support FDI for the long term to enhance economic growth, and reduce interests rate and exchange rates by establishing usage of a single currency or flexible exchange rates. This study aims to help policymakers and analysts determine the advantages of monitoring changes in macroeconomic fundamentals and economic growth for attracting FDI. The results of the study have significant policy repercussions, particularly for fiscal and monetary policy, particularly to resolve problems of slow economic growth to a low proportion of appropriate FDI in West Sub-Saharan African countries and other developing countries.

Assessing Fiscal Policy Impact on Economic Growth: A Comparative Analysis of Indonesia and Turkey

2024-12-29T00:19:19+00:00

The study involves the application of Vector Error Correction Models (VECM) to analyze macroeconomic dimension of fiscal policy on economic growth in Indonesia and Turkey. Furthermore, it attempts to depict the paths of fiscal policy and GDP evolution in the two economies by providing data for the period 1980-2022. It uses Augmented Dickey Fuller (ADF) tests and Johansen co-integration tests to check against the stationarity and the long-run relationships between fiscal policy variables and economic growth. The result of Granger causality analysis was used to address the two-way relationship between these variables. Data discloses that the fiscal policy of Indonesia does not significantly affects economic development directly, as Turkey’s case where government expenditure does have a positive relationship with economic growth in the short term. Despite the common unstable connection between government participation, government revenue and economic growth, there exists a long-term inimical correlation in both countries. The results of the study indicate the impact of fiscal policy as non-immediate measure is not effective with regards to Indonesia economic growth. This calls attention to the role of resource reallocation in creating a lasting development rate. That is why the relationship between public spending and short-term growth shows significant effectiveness of certain fiscal policy monetary measures aimed at increasing the rates of material production and growth in the country. The research indicates that long period of government expenditure maybe unbeneficial for developing economies. Contrary to this, it is governments’ duty to determine the etymologically sound methodologies of prudent fiscal plans that will enable privatization, investments, and economic growth.

Structural and Digital Transformation of the Financial Industry: A Futuristic Approach for Sustainable and Green Digitalization

2024-12-29T00:19:19+00:00

This study examines the structural and digital transformation within the financial industry, portraying the urging need for green sustainable digitalization within Industry 4.0. This study aims to explore the role of digital technologies, such as artificial intelligence (AI), big data analytics, and the Internet of Things (IoT), in promoting environmental sustainability in the financial sector. The study reviews the existing literature and the identified critical challenges and opportunities in sustainable digital transformation. It proposes pathways for leveraging digitalization to attain socio-environmental sustainability and green finance. Empirical evidence supports such analysis, finding positive impacts that digital finance brings to green technology innovation and carbon neutrality, emphasizing the synergy of digital development with sustainability goals. The study finds that policy and regulation will be critical in smoothing the transition and fostering diverse social and environmental implications of sustainable digital finance. In this context, the study brings a futuristic outlook on the way digital technologies are integrated within corporate strategies to be part of sustainable development.

Gaining Sustainable Performance through Risk Management System: Dealing with Uncertainty in Islamic Insurance Companies

2024-12-29T00:19:19+00:00

This study investigates how the halal business process sustains company performance by examining the effect of premiums, claims, operating costs, investment income, and risk-based capital on the profitability of Islamic insurance in Indonesia. In particular, the risk management system is key to demonstating how Islamic insurance companies restrain risks to gain profits, considering that the basic concept of Islamic insurance is the risk sharing approach. Moreover, to provide research novelty and originality, the authors expand the research framework to include the interactions of the company's risk management system to test the influence of investment income and risk-based capital on profitability. The overall population comprised all Islamic insurance companies in Indonesia, but samples were restricted to life insurance businesses registered with the Indonesian Islamic Insurance Association for 2018-2022. The authors were left with a sample of 13 companies after using a non-probability approach with a purposive sampling technique. The data was analyzed by STATA 17 on four gradual statistical procedures: Panel Data Regression Analysis, Moderated Regression Analysis, Robustness Test Analysis, and Content Analysis. The results demonstrate that the premiums, claims, and investment income have no significant effect on company profitability. Meanwhile, operational costs and risk-based capital have a significant effect on profitability performance. Furthermore, enterprise risk management successfully acts as a moderating variable. Based on findings, the authors strongly recommend that Islamic insurance companies effectively implement enterprise risk management in dealing with uncertain circumstances for the real business process.