Sharia vs non-sharia compliant: which gives much higher financial-based brand equity to the companies listed in the Indonesian stock market?

Abstract

Purpose The study aims to examine the difference of financial-based brand equity of Sharia-compliant and non-Sharia-compliant companies listed in the stock market. Design/methodology/approach The five-year data were collected from 561 companies listed in the Indonesian stock market (349 Sharia-compliant firms and 212 non-Sharia-compliant firms). Findings Based on five years of observations, the study shows that Sharia-compliant companies have much higher brand equity than companies that are not Sharia-compliant. However, the study did not find consistent results when the study examined the differences between brand equity in newly listed Sharia-compliant firms in the short run (two-quarters of the observations). In other words, Sharia-compliant status positively impacted a company’s brand equity only in the long run. Research limitations/implications The study examines only the brand equity of Sharia- and non-Sharia-compliant companies in the Indonesian stock market. Practical implications The study suggests that companies should list their equity in the Islamic stock market as the empirical evidence shows that the companies listed in the Sharia index have much higher brand equity than companies listed in the non-Sharia index, although this impact can only be seen in the long run. Originality/value The study integrates finance and marketing perspectives, which are often disconnected in daily business. In addition, the study provides a piece of empirical evidence on the effect of financial decision to be listed in the Islamic stock market on the establishment of brand equity, which represents the long-term intangible assets of the firm in the eyes of the customers.