Analysis of Syariah quantitative screening norms among Malaysia Syariah-compliant stocks

The purpose of this study is to investigate whether Malaysian Syariah-compliant quantitative screening adopts criteria, which can be considered more liberal than those used by the DJIM, S&P and FTSE Syariah index providers, and also to assess the financial health of the sample companies. To do these, a sample of 477 Syariah-compliant firms were tested using the financial ratios, namely, liquidity ratio, interest ratio, debt ratio and non-permissible income ratio used by these world leading index providers. The results showed that fewer companies (12.16%) are qualified under the DJIM criteria and even more companies (63.10%) are qualified under the FTSE criteria. The reasons for this difference are: (1) the use of different formulae to calculate the ratio; (2) the use of different thresholds; and (3) the different emphases applied by the world index providers. The results of the financial health screen show that the majority of the Syariah-compliant companies are financially healthy.