Legal rules, information transparency and Islamic bank capital decisions

To what extent does the formal institutional environment influence Islamic bank capital decisions? We answer this question by assessing effect of legal rule index on a sample 100 banks in 28 countries from 1999 to 2013. Our econometric analyses show that positively and significantly influences ratios. The results can be explained idea effective rules incentivize hold higher ratios signal better monitoring depositors regulators. In addition, we find positive association enhanced through strong information transparency channels, democratic stable political institutions. These provide insight into how shape It further suggests serves as constraint policymakers, any given guideline may function very differently depending complexity environment.