Degree

Master of Science in Islamic Banking & Finance

Department

Department of Finance

Faculty/ School

School of Business Studies (SBS)

Date of Submission

Spring 2026

Supervisor

Dr. Adnan Haider, Professor, Department of Economics

Committee Member 1

Dr. Adnan Haider

Committee Member 2

Dr. Imam Uddin, Examiner - I, Institute of Business Management (IoBM), Karachi

Committee Member 3

Dr. Salman Ahmed Shaikh, Examiner - II, IIUM Malaysia

Keywords

Shariah Compliance, Shariah-compliant equity, screening methodologies, governance, performance, risk management, Islamic finance, ESG integration, income purification

Abstract

The Islamic finance industry faces fragmentation in Shariah-compliant equities and funds due to differences in screening methodologies, governance structures, performance benchmarks, risk profiles and technological adoption. This thesis, “Shariah-Compliant Equities and Funds: A Thematic Review of Screening Methodologies, Market Performance and Governance” conducts a thematic systematic review of 79 scopus-indexed papers from 2008 to 2025. The review synthesizes findings across five themes: T1: Shariah screening methodologies and standards; T2: Corporate and Shariah governance, firm behaviour and shareholder outcomes; T3: Shariah compliance and financial performance; T4: Risk, volatility and market integration; and T5: Innovation, technology and ESG integration.

Key findings reveal variations in quantitative screens affect performance and risk. As per majority studies, market capitalization-based screens admit a smaller asset universe but provide better returns whereas asset-based screens provide stability during not only financial but also non-financial crises. Stricter shariah screening reduce diversification but improve risk-adjusted returns. Strong governance and consistent compliance enhance earnings quality, investor trust and Shariah compliance whereas integrating ESG and earnings quality criteria with Shariah screening enhance stability.

Research gaps include lack of standardized frameworks, studies on impact of board religion, religious education and training on Islamic finance on governance, empirical testing of proposed models and limited cross-country comparisons with research focusing on limited timeframes and geographical locations. Recommendations for regulators include enforcement of global standardization, mandatory disclosures, independent SSBs, increased female representation on BoD and establishment of a global Shariah-compliant stock exchange. For fund managers, careful adoption of Shariah-screening methodology and adoption of AI screening, smart-beta low-risk strategies and stochastic purification model. For investors, to prioritize ESG integrated portfolios and select higher dividend paying firms with consistent Shariah compliance.

Document Type

Restricted Access

Submission Type

Thesis

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