The Effect of Islamic Financing on Non-Financial Firms Listed in Pakistan Stock Exchange

Abstract

This study examines the influence of Islamic financing on the non-financial firms listed in Pakistan Stock Exchange by evaluating the financial performance of the firms that admittance the Islamic financing over the period of Ten years (2011-2020). The study on the whole observes the influence of long-term debt, long term Islamic financing instruments and owners’ equity on financial performance of listed companies in Pakistan stock exchange. The study engagements the use of information on the kind of financing measured and additional in detail return on assets and return going on equity to extent the performance of the samples firm that had admittance to check side by side of influence of Islamic financing. In this study practice deductive approach which means we would be going from narrow to broader that means we would be using this study to refer from other Islamic financing factors. We would use Quantitative study for this research. The data can be analyzed quantitatively used multiple analysis of variance and may lead to vivid result. This study’s Time Horizon would be longitudinal, the 444 listed firms in Pakistan stock exchange were embark on for this study, however out of the 444 listed firms the study was capable to find 25 firms who take on Islamic financing from 2015-2020. Secondary data was collected form PSX portal and annual reports of firms. Descriptive statistics, regression, bivariate correlation analysis, multi collinearity and multivariate analysis of variances was used to analyze the variables. The relationship among long term debt and performance determinates (ROA and ROE) was significant and negative associated. The relationship among long term Islamic financing instruments and firm financial performance determinates (ROE and ROA) was significant and positively associated. The relationship among owner equity and performance determinates (ROE and ROA) was significant and negatively associated. The results are central to course of action and by-law the ruling classes, such as capital market place powers that be to paradigm and establish policies that would adoptive business growth without turn a blind eye to the Islamic religion. The study recommends review and expansion of lawful structure to completely integrate Islamic Financing to conventional finance option in Pakistan, requirement for elevation and consciousness of the services and also recommended, further research on majority business subdivisions to understand the influence of short-term financing.