Suggestion
D. Finding and Discussion
a. Resilience and Stability of Shariah and Non Shariah Compliance Stock 1. Indonesia
The figure 1 describes the trend of Altman Z-Score of non shariah compliance stock in Indonesia market. Based on this figure we can conclude some important point regarding to the issue of Altman Z-Score. During the global financial crisis 2008, majority of non-shariah compliance stock are shaken in facing financial shock. It can be seen from the fact that Altman Z-Score of almost 20 companies are decreased significantly. There are very few company whereby their altman z-score was not change. This fact be said that, in facing global financial shock, non-shariah companies are tempted to fluctuate. Moreover, after the financial crisis, the altman z-score of non-shariah company also tend to fluctuate, that indicate the resilience of these company is quite low.
Figure 1: Altman A-Score Non Shariah Compliance Stock in Indonesia
While, acccording to the figure 2 below we can see that shariah compliance stock in the case of Indonesia Islamic Capital Market Have a better risilience. It can be seen from the line graph of 30 companies in Indonesia that during the global financial crisis the altman z- score are quite stable. Compared to conventional counterpart, Islamic stock are more stable either in financial crisis or in normal economic condition. In addition, although there is still
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some company which are shaken by financial crisis, but the magnituted is quite low compared to non-shariah compliance stock.
Figure 2: Altman Z-Score of Shariah Compliance Stock in Indonesia
In addition, in term of the number of company, from the 30 sample, there is 17 shariah companies in Indonesia in which its altman z-score was not changing when global financial crisis hit in 2008. It can be seen from the table in appendix, whereby there are only 14 companies shaken by global financial crisis. It is better compared to non-shariah compliance stock that have more than 21 companies with decreasing its altman z-score.
Based on the two graph, namely shariah compliance stock and non-shariah compliance stock, this study has two importan finding. First, in Indonesia‘s capital market, shariah compliance are more stable than non-shariah compliance stock. It can be seen from the value of altman z-score in crisis and non-crisis economic condition. Second, from the view point of risilience against financial shock due to global financila crisis, shariah compliance stock has a better resilince than non-shariah compliance stock.
2. Malaysia
The line graph below shows the altman z-score of 30 companies in Malaysia. From this graph we can conclude that during the global financial crisis 2008, some company listed in bursa malaysia was encountered the changing of altman z score. It indicated that during the crisis, the default probability of some company was increased significantly. Although some company are quite strong in facing financial shock, but at the majority, all company were suffering a financial shock.
Figure 3: Altman Z-Score of Non-Shariah Compliance Stock in Malaysia
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As same as with indonesian case, shariah compliance stock in Malaysia has a better condition in the global financial crisis. Even, some companies in Malaysia market, have a better altman z-score during the crisis. The linegraph below shows this fact, whereby the altman z-score of shariah compliance company inreased in 2009, or one year after global financial crisis. It means that, the probablity default of some company decreased after the crisis.
Figure 4: Altman Z-Score of Shariah Compliance Stock in Malaysia
From this analysis this study can conclude that, shariah compliance stock in overall are more stable than conventional stock. It is evidenced by the fact that altman z-score as described by linegraph above. In addition, based on the value of altman z-score and its standard deviation, as described in appendix, we can see that the standard deviation of Islamic stock are lower than conventional counterpart. In Indonesia market, the average standard deviation is 0,495 for non shariah compliance stock and 0,46 for shariah compliance stock.
While in Malaysia market, for shariah compliance stock have average standard deviation around 0,54 and 0,59 for non shariah compliance stock.
b. Macroeconomics and The Risilience of Company.
The next study is empirically test the impact of macroeconomics variable on the resilience of shariah compaliance and non-shariah compliance stock for both in Indonesia and Malaysia. Table 1 shows the Bank of Indonesia rate has negative impact on the change of altman z-score of shariah compliance stock, with coefficient at -0.033451. It can be humbly said that when BI rate increased by 1% the probability of bankruptcy decreased by 0.065745%. In addition, based on the empirical test, for the shariah compliance stock, BI rate is the only variable that significantly affected the change of bankruptcy risk. The negative sign of BI Rate is arguable, since the increase of interest rate can be seen as the increase of interest rate spread usually indicates a ―good time‖ in the economy in the future and therefore a lower
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probability of default. However, the increase of Spread also reflects the increase of the opportunity cost of future investment. Therefore, it has an opposite impact on bankruptcy risk.
Table 1. Panel Regression Result for Indonesia(Random Effect)
No Variable Indonesia
Shariah Non Shariah
Coefficient Sign. Coefficient Sign.
1 BI Rate -0.033451 0.0285* -0.065745 0.0111*
2 CPI -0.241594 0.6563 -0.364905 0.3575
3 M2 -0.003631 0.3282 -0.258534 0.7326
4 GDP -0.009914 0.6756 -1.098.994 0.0443*
Adj.R-Square 0.707417 0.755095
*Significant at 5% Level
Menwhile, in case of non-shariah compliance stock, there are two significant macroeconomics variables that has impact on bankruptcy risk, with significant level at 5%.
The table 1 shows that the coefficiet of BI Rate is at -0.065745, with a negative sign.
Moreover, economics growth (GDP growth) is also the significant variable with coefficient at -1.098994, with positive sign. The positive sign of GDP indicate that when GDP growth increase 1%, the bankruptcy risk of non shariah compliance stock decrease. It is reasonable, since the increase of GDP indicate good economic condition, thus, the company performance increase. As a result, the probablity of default of the company are decrease. In order to get a measure of ―goodness of fit‖, we calculated the coefficient of determination R2 with the provided information from the regression. Its value is 0.707 for shariah compliance stock and 0.755 for non shariah compliance stock.
Table 2. Panel Regression Result for Malaysia (Random Effect)
No Variable Malaysia
Shariah Non Shariah
Coefficient Sign. Coefficient Sign.
1 BLR -0.247617 0.4169 -0.186383 0.5125
2 CPI 0.002127 0.9402 -0.001608 0.9534
3 M2 1.767.009 0.5721 1.657.009 0.6721
4 GDP -0.845143 0.8637 -1.898228 0.0224*
Adj.R-Square 0.011507 0.237031
*Significant at 5% Level
Table 2 above describes the panel regression result for the case of Shariah and non Shariah compliance stock in Malaysia. By using significant level of 5%, this research found that for shariah compliance market, all macroeconomic variable are not significant. It indicates that, the fluctuation of altman z-score is not affected by the change of macroeconomics condition. It also can be interpreted that, the resilience of Shariah compliance company is very good especially when it measured from macro condition. Probably, the variable that determine the probablity default of the shariah compliance company is company fundamental factor, or company performance, or unsystematic variable.
On the other hand, for non shariah compliance company, the table 2 are showing that GDP growth has signficant impact on bankruptcy risk. The coeffient is 1.898228, that indicates when GDP growth Increase by 1%, bankruptcy risk will decrease by 1.898228%, respectively.
Based on the two result both in Indonesia and Malaysia case, this study can generate some imprtant conclusion. First, shariah compliance stock are more stable compared to its conventional counterparts. This stability is affected by the better performance of shariah compliance company, in which to be listed as company that comply to shariah they must satisfy with some criteria, known shariah screening. In this screening, company must fulfill certain criteria non only in the main operation and business activities but also in term of
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financial performance, such as debt to equity ratio, non-halal income etc. Hence, in nature, shariah compliance company must be perform better than conventional, and thus, they have to be more stable. In case of global financial crisis hit, shariah compliance company will more stable and has better resilience.
Second, this research found that there are 1 important macroeconomis variable in which has significant impact on the stability of shariah compliance stock in Indonesia, namely Interest Rate. It indicates that, although in shariah, interest rate are prohibitted, but in fact, there are almost all companies can not to avoid interest. All their activities are related to interest activities. Therefore, it is not surpising, if interest rate has significant impact for shariah compliance company in Indonesia.