Abstract
This study aims at examining the integration impact of the five ASEAN Islamic capital markets on asymmetric information for ASEAN Economic Community (AEC) development. Utilizing samples of market and financial panel data from 2009 to 2015 among the five ASEAN Islamic capital markets, and applying two-country portfolios of the Islamic capital markets among the five ASEAN countries to measure the different levels of Islamic capital market integration, this study suggests that the different levels of the Islamic capital market integration between Indonesia and Malaysia are found to result in asymmetric information negatively. The strongest Islamic capital market integration between Indonesia and Malaysia affect reduced asymmetric information more consistently than the other two-country portfolios, while the weakest level of integration between the Philippines and any other four Islamic capital markets that affects asymmetric information inconsistently is also supported. These results confirm an interplay between a modern portfolio theory, Efficient Market Hypothesis (EMH), contract theory, and general economic theory, and also provide new insights for stakeholders in investment decisions and strategies, cross-border regulation of economic resources, and other plentiful benefits.
Highlights
To date, there has been a great deal of literature on capital market integration, both related to Islamic and conventional capital markets
The strong impact of Islamic capital market integration on asymmetric information is significantly reflected in the dummy variable of a two-country portfolio of DIM, which is consistent with Qizam et al (2020) that place the Islamic capital market integration between Indonesia and Malaysia at the strongest level
The strongest Islamic capital market integration between Indonesia and Malaysia that proves to result in the reduced asymmetric information can be consistently represented from all the significant-negative coefficients of the dummy variables of DIM in all the tests
Summary
There has been a great deal of literature on capital market integration, both related to Islamic and conventional capital markets. While the previous studies address more general issues regarding the conventional capital market integration, mostly linked with international diversification, this issue concerning the impact of the Islamic capital market integration on asymmetric information among the five ASEAN countries, to the best of the author’s knowledge, has not been empirically explored yet, focusing on the extent to which the integration levels empirically affects asymmetric information. Applying a two-country portfolio as a dummy variable. Islamic capital market integration and asymmetric information: a study in the five ASEAN countries
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