Examining the Effects of Islamic Beliefs on the Valuation of Financial Institutions in the United Arab Emirates

Abstract

The study examines whether United Arab Emirates (U.A.E.) investors value more Islamic financial institutions in comparison with traditional financial institutions and other companies in the economy during the period from 2001 to 2005. The study highlights the major differences between products offered by Islamic versus traditional financial institutions. It is argued that these differences do not necessarily affect the measures of profitability and performance. The main finding of the paper is that stockholders of Islamic financial institutions in the U.A.E. were willing to pay a premium for their Islamic faith. This highlights the U.A.E. clientele preference for institutions that closely follow Islamic laws.