The role of stock market in influencing firms’ investments in Jordan

• Published date: 11 February 2019
• Pages: 90-118
• Date: 11 February 2019
• DOI: https://doi.org/10.1108/IJOES-08-2018-0122
• Author: Said Sami Al Hallaq,Mohamad M. Ajlouni,Ahmed Shakir Al-Douri
• Subject Matter: Economics,Social economics

The role of stock market in

influencing firms’investments

in Jordan

Said Sami Al Hallaq

Department of Economics, Yarmouk University, Irbid, Jordan, and

Mohamad M. Ajlouni and Ahmed Shakir Al-Douri

Department of Banking and Finance, Yarmouk University, Irbid, Jordan

Abstract

Purpose –With reference to the methodology of Prof Choudhry in his book “Tawhidi Epistemology and its

Applications: Economics, Finance, Science, and Society”in 2014, in a different context, this study aims to present

the conceptual fundamental of Islamic finance investment, where investment decisions are governed by Divine

law and Islamic jurisprudence, followed by the empirical nature of real-world issues where investment decisions

are governed by only financial indicators, using the Amman Stock Exchange as a case study.

Design/methodology/approach –As pointed out by Raderbauer (2011), research and industry

initiativesmainly focus on environmental measures while ignoringthe economic and socio-cultural dimension

of sustainability. Recognizing the importance of a holistic understanding to define sustainable business

practices for the accommodation industry. Financial markets are no exception; moral and values either

coming from secular or religiousunderstanding help to examine relationships between attitudesand actions,

as well as differences in attitudes and actions related to the business’characteristics. In business, ethical

considerations apply to a broad list of virtues that companies, their managers and employees customarily

seek to adopt. These include,but are not limited to, the encouragement of honesty, integrity and efficiency, as

well as diversity and communication skills. One of the most common sources of ethical considerations is

religion. In these cases, religious doctrine imparts a sense of appliedethics, where one considers what right

conduct is, how to live a life pleasing to the Divine and how one should treat him/herself and others in

accordance with those teachings. Again, as ethical considerations is a broad philosophical concept, it can

apply to any situation where the person ponders the nature of right and wrong, how to recognize the

differenceand the meaning those conclusions carry for everyday life.

Findings –It can be concluded that the overall the quantitative and qualitative statistics showed that

accommodation businessmanager’s decision has had a very little positive attitude toward sustainabilityand

the implementation of sustainable business practices in ASE financial transaction, no matter what

classification, typeof business, ownership or size of business. Only rules and regulations governthe attitude

and behavior when makingfinancial transactions with profit is the main target. Moral indicatorscould not be

seen throughout the analysis and testused to achieve objectives of the study at hand. One can imagine that

the combined two factors together “Moral-Material”in implementing financial transactions will produce a

more beneficial outcome. Achieving a material and holistic objective will produce an optimum situation,

which can contributepositively to sustainable development.

Originality/value –Islamic alternativesto traditional investment tools have been driven by the fact that

such tools do not conform to the Islamic general principles of the Shari’ah (Usmani,2002). There has been a

growing desire to have fundsin which profits are not based on riba or interest, which is prohibited in Islam.

Muslims deem that profit should come because of efforts; this is not the case in interest-dominated

investments. In addition, there is a desire to have investment portfolios, which are morally purified. Thus,

investments in companies that are not in compliancewith the Shari’ah are not permitted and are eliminated

from the portfolio. To ensure compliancewith the forgoing condition, Shari’ah advisory boardswhose role is

mainly to giveassurance that money is managed within the framework of Islamiclaws govern Islamic mutual

funds (Hassan, 2001;Hassan, 2002). On the other hand, dealing with the applied part, thepaper will deal with

a case study fromJordan (Amman Stock Exchange), where, codeof ethics is issued by virtue of the provisions

IJOES

35,1

90

Received24 August 2018

Revised24 August 2018

Accepted13 September 2018

InternationalJournal of Ethics and

Systems

Vol.35 No. 1, 2019

pp. 90-118

© Emerald Publishing Limited

2514-9369

DOI 10.1108/IJOES-08-2018-0122

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/2514-9369.htm

of Article 26 (e)of the Securities Law No. 23 of 1997. The Amman Stock Exchange operatesas an exchange for

the trading of securities. The company lists securities such as equities and bonds. Its activities include

providing enterprises with a means of raising capital by listing on the exchange; encouraging an active

market in listed securities based on the determination of prices and trading; providing facilities and

equipment for trading the recoding of trades and publication of prices; monitoring and regulating market

trading; and coordinatingwith the Jordan Securities Commission as necessary.The company’s activities also

include ensuring compliance with the law, fair market and investor protection; setting out and enforcing a

professionalcode of ethics.

Keywords Investment decisions, Amman stock exchange, Islamic financing, Ethical considerations,

Moral material considerations

Paper type Research paper

1. Introduction

With reference to the methodology of Prof Choudhry in his book “Tawhidi Epistemology

and its Applications: Economics, Finance, Science, and Society”in 2014, in a different

context, the current study will present the conceptual fundamental of Islamic finance

investment, where investment decisions are governed by Divine law and Islamic

jurisprudence, followed by the empirical nature of real-world issues where investment

decisions are governed by only financial indicators,using the Amman Stock Exchange as a

case study.

Islamic alternativesto traditional investment tools have been driven by the factthat such

tools do not conform to the Islamic general principles of the Shari’ah (Usmani, 2002). There

has been a growing desire to have funds in which profits are not based on riba or interest,

which is prohibited in Islam. Muslims deem thatprofit should come because of efforts; this

is not the case in interest-dominated investments. In addition, there is a desire to have

investment portfolios, which are morally purified. Thus, investments in companies that are

not in compliance with the Shari’ah are not permittedand are eliminated from the portfolio.

To ensure compliance with the forgoing condition, Shari’ah advisory boards, whose role is

mainly to give assurance that money is managed within the framework of Islamic laws,

govern Islamic mutualfunds (Hassan, 2001, 2002).

On the other hand, dealing with the applied part, the paper will deal with a case study

from Jordan (Amman Stock Exchange), where, code of ethics is issued by virtue of the

provisions of Article 26 (e) of the Securities Law No. 23 of 1997. The Amman Stock

Exchange operates as an exchangefor the trading of securities. The company lists securities

such as equities and bonds. Its activities include providing enterprises with a means of

raising capital by listing on the exchange; encouraging an active market in listed securities

based on the determination of prices and trading; providing facilities and equipment for

trading the recoding of trades and publication of prices; monitoring and regulating market

trading; and coordinating with the Jordan Securities Commission as necessary. The

company’s activities also include ensuring compliance with the law, fair market and

investor protection;setting out and enforcing a professional code of ethics.

2. Fundamentals of Islamic investing

The Islamic law on commerce is known as fiqh al-mu`amalat. Much of the laws, rules and

interpretations of Shari’ah take into consideration issues of social justice, equitability and

fairness, as well as practicality of financial transactions. In general, the Shari’ah legal

maxim in relation to commercial transactions and contracts state, “they are permissible

unless there is a clear prohibition”. Briefly, prohibitedelements of a commercial transaction

must first be removed for it to be Shari’ah-compliant. The major prohibited elements under

The role of

stock market

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