Abstract
This study attempts to investigate the behavior of non-financial ISL
firms towards usage of TC. In line with the previous literature, it is hypothesized that
ISL “Shar¯ı‘ah Compliant” indicates higher use of TC by such firms, both demand
and supply of TC. It is also hypothesized that TC is substitute of bank loan. The
results are based on 338 non-financial firms listed on Pakistan Stock Exchange
for 2008 to 2016 observation period. These include non-financial firms from all
sectors. The study used random Generalized Method of Moment (GMM) estimation
technique to explore the relationship of ISL and usage of TC as it is the most
powerful method when sample size is large. The study found that ISL firms use
more TC, as compared to conventional firms that have more access to bank loan.
This study also found that firms with ISL prefer TC over the bank credit. The result
of this study proves all stated hypotheses.
Muhammad Kamran, Jaleel Ahmed, Ikram Ullah. (2019) Does Islamic Label Indicate Higher use of Trade Credit? Evidence from Shar¯ı‘ah Compliant Non-financial Firms in Pakistan, Journal of Islamic Business and Management, Vol ume 9, Issue 2.
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