Equity Pricing in Islamic Banks: International Evidence

Jocelyn Grira, M. Kabir Hassan, Chiraz Labidi, Issouf Soumaré

Research output: Contribution to journalJournal Articlepeer-review

19 Citations (Scopus)


Using a large sample of publicly listed banks, we assess the ex-ante cost of equity of Islamic banks and compare it with the ex-ante cost of equity of conventional banks. We show that the Islamic banks have, on an average, higher equity financing costs than the conventional banks. The difference in the cost of equity between the two banking systems is economically significant and varies greatly across countries. Moreover, we find that institutional quality improves the cost of equity for both Islamic and conventional banks, with a more pronounced effect for the former. Our findings are robust to alternative assumptions and model specifications, disproportionate analyst coverage pertaining to firm size, and other firm- and country-specific factors.

Original languageEnglish
Pages (from-to)613-633
Number of pages21
JournalEmerging Markets Finance and Trade
Issue number3
Publication statusPublished - 19 Feb. 2019


  • Islamic banks
  • cost of equity
  • institutional environment


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