A Review of Empirical Islamic Finance Literature

Abstract

This paper reviews empirical studies with particular interest in the Islamic finance literature and highlights future research directions. The earlier literature of Islamic finance was built on the Islamic economic foundation of social justice and fairness, which was formed theoretically from the primary sources of Sharia coupled with some analytical frameworks. Subsequent studies emphasized on the empirical investigations without far-reaching analytical and theoretical postulations in the area. Although empirical studies on Islamic banking are plenty, there is a new emerging empirical literature on Islamic finance focusing on mutual funds, corporate finance, real estate finance, Takaful, and the finance-growth nexus, whereas Islamic accounting studies are mostly qualitative in nature. The literature provides a mixed picture of Islamic financial markets and instruments showing that the Islamic ones perform better most of the time but also performs worse at times compared to their conventional counterparts. This paper discusses relevant issues to Islamic finance and identifies avenues for future research and policy implications.