Abstract
PurposeThis paper aims to develop a ranking methodology for the companies included in the Islamic indices in Turkey. Thus, this paper simplifies the decision-making process for investors with Islamic sensitivities to stock market investment when constructing their investment portfolio.Design/methodology/approachThis paper uses a case study of 20 companies listed on Borsa Istanbul, drawing data from their 2017, 2018 and 2019 financial reports. These companies are scored and ranked according to their compatibility with the screening criteria used by Ziraat Katilim index in Turkey. In addition, this paper uses the quantitative screening process to calculate the ranking scores of these companies.FindingsThe findings show that some companies are highly compatible with the screening criteria, with ranking scores close to 100 points. However, some companies satisfied the criteria on the margin. This may not be a desirable result for some investors.Research limitations/implicationsOnly 20 companies are included in the analysis. Since the conventional accounting system is used in Turkey, it was difficult to get exact information about the companies’ Sharīʿah compatibility from the financial results.Practical implicationsThe findings assist investors to determine which company is ethically more responsible than others within the Islamic framework. There are also implications for the companies in question, index providers and Sharīʿah scholars.Social implicationsThe findings aim to simplify the decision-making process of investors who have Islamic sensitivities to stock exchange market investment when they constitute their portfolio.Originality/valueTo the best of the authors’ knowledge, it is one of the first attempts to develop a ranking methodology for Sharīʿah-screened stocks in Turkey even though Sharīʿah screening has been on the agenda since the late 1990s. This paper also compares 11 indices based on their screening criteria.
Highlights
In today’s world, there are different options for investment such as direct participation in the equity shareholding of companies, investment in equities/stocks on the secondary market,© Zeyneb Hafsa Orhan and Murat Isiker
The aim of this paper is to develop a ranking methodology for 20 companies that are listed on BIST and included in the Islamic index of Ziraat Katılım (ZK) in Turkey
To achieve the aim of this paper, 20 companies from the list provided in 2017–2019 by ZK index are selected according to their 12-month average market capitalization
Summary
In today’s world, there are different options for investment such as direct participation in the equity shareholding of companies, investment in equities/stocks on the secondary market,© Zeyneb Hafsa Orhan and Murat Isiker. Detailed information on the main subject of this paper À Shari’ah screening and indexation À is discussed together with the related literature. Islamic finance is itself part of a larger idea called Islamic economics, which flourished at the beginning of the 20th century to develop economic concepts, institutions and policies compatible with the Islamic ethos and rules. In this regard, Islamic finance came onto the scene with the aim of establishing financial institutions and instruments within the framework of Islamic economics. The first Islamic financial institutions (IFIs) that were established in the 1960s were Islamic banks; Mit Ghamr Savings Bank, established in 1963 in Egypt, is accepted as the first IFI in the world
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