This study investigates the relationship between Shariah non-compliant risk and stock returns in Malaysia between 2018 and 2020. The findings demonstrate a significant positive relationship between Shariah non-compliant risk and stock returns. The study revealed that in the long run, investors prioritize higher returns over the Shariah compliance of a firm despite the higher risk associated with non-compliant stocks. This finding aligns with the conventional theory of finance, which suggests that higher risk leads to higher returns. On a positive note, the lower returns associated with Shariah-compliant stocks provide some indication that Shariah-compliant stocks are exposed to lower risk and are a more stable investment. The findings of this study offer valuable insights for investors seeking to invest in Shariah-compliant financial products and businesses. This research contributes to the literature on the relationship between Shariah non-compliant risk and stock returns in Malaysia and offers useful implications for policymakers and investors alike.
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In-Text Citation: (Bakar et al., 2023)
To Cite this Article: Bakar, N. A., Zaki, S. N. A., Jaafar, M. N. S., Yusoff, M. I., Ghani, M. G. A., & Bakar, N. A. H. A. (2023). The Impact of Shariah Non-Compliant Risk on Stock Return in Malaysia. International Journal of Academic Research in Accounting Finance and Management Sciences, 13(2), 22–35.
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