ABSTRACT
We investigate the disclosure practices of screening and compliance information of Islamic equity funds around the world. Disclosures on Sharia advisors and screening information are quite high, but they are lower for compliance information such as Sharia advisory report (SAR) and holdings data. The results show that younger funds with better Sharia advisory board (SAB) governance which are domiciled in countries belonging to an Islamic international standard-setter body have the highest disclosure levels. However, funds domiciled in countries with a central SAB and following common law disclose less Sharia-related information. These findings are important for the effectiveness of disclosure framework.
Acknowledgments
We thank the anonymous referees, the editor (Prof. Ali Kutan), and the participants of the 4th SMICBES for constructive comments and suggestions. All errors, of course, remain with us.
Notes
1. Banasik, Barut, and Kloot (Citation2010) find that fund managers focus more on selection strategy information while the disclosure level on other requirements varied.
2. About one-quarter of the world’s population is Islamic. Asia is home to nearly 20% of the global Muslim population, and Indonesia has the world’s largest Muslim population with 203 million people or about 13% of the world’s Muslims. The Middle East and North Africa (MENA) make up another 20% of the world’s Muslims. More than 50% of Muslims live in Persian Gulf coast countries and the MENA region. About one-fifth of Muslims (300 million) live in non-Muslim countries. See “Mapping the Global Muslim Population: A Report on the Size and Distribution of the World’s Muslim Population,” Pew Research Center. 2009 (http://pewforum.org/docs/?DocID=450).
3. These details are either designed by the fund’s own SAB or adopted from a prominent Islamic index.
4. Other governance measures exist, such as information related to the SAB’s remuneration, the existence of an external auditing process, the number of SAB meetings in a year, and the legitimacy of the SAB’s appointment method. Although each of these may be a better measure, this information is difficult to collect for our full sample.
5. We could not use creditor’s right and Hofstede’s national cultural scores to measure another proxy of a country’s investor protection, because data are not available for all countries in our sample.