Islamic corporate finance: Capital structure

Mohamed Eskandar Shah Mohd Rasid, Ajim Uddin, Mohammad Ashraful Ferdous Chowdhury

Research output: Chapter in Book/Report/Conference proceedingChapter


The capital structure choices of a firm not only determine the current value of the firm, but also largely determine its long-term survival. Modigliani and Miller’s seminal 1958 paper explicates conventional firms’ capital structure choices. However, we are yet to develop a solid theoretical framework about the financing decisions of Islamic firms. This is a review chapter on current developments in the field of Islamic capital structure. The chapter starts with a short discussion about the various sources of capital and their advantages and disadvantages, followed by a detailed description of traditional capital structure theories and their real-world empirical evidence. Finally, it discusses how the capital structure decision for Islamic firms differs from that for conventional firms, and the role sukuk, dual-banking system, and debt threshold play in determining Islamic firms’ capital structure.

Original languageEnglish (US)
Title of host publicationIslamic Corporate Finance
PublisherTaylor and Francis
Number of pages20
ISBN (Electronic)9781351061490
ISBN (Print)9781138480919
StatePublished - Jun 4 2019

All Science Journal Classification (ASJC) codes

  • General Economics, Econometrics and Finance
  • General Business, Management and Accounting


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