In their article, the authors compare the general performance of conventional and religious (Islamic) stock returns in Saudi Arabia. They aim to determine the impact of religious preferences and their ability to create investor recognition effects and segmented financial markets (Alhomaidi, et al., 2019). The examination of all Saudi firms’ stock returns over the past several years illustrated the fact that recognized Islamic stocks have a substantively broader investor base and lower idiosyncratic risk (Alhomaidi, et al., 2019). In addition, the differentiation between less-recognized conventional and Islamic stocks in predominantly religious markets affects the incorporation of information into asset prices. Moreover, Islamic stocks exhibit higher systematic turnover and considerable integration with both global and local factors (Alhomaidi, et al., 2019). In general, this research provides evidence of the religious norms’ impact on corporate decisions.
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In general, market segmentation may be regarded as a specific process of the global market’s division into smaller segments based on customers’ shared characteristics. It is an effective tool that helps to develop different marketing strategies and address the target group more appropriately. Religion is an important factor in market segmentation. At the same time, the efficacy of religious market segmentation strongly depends on external factors, such as the cultural and social norms of the targeted society. On the one hand, the understanding of the country’s customs, traditions, and religion facilitates its market entry for foreign companies. On the other hand, these companies that perform by the country’s religious norms have more opportunities to become successful in local settings compared with a conventional corporation. In addition, corporate leaders frequently make investment and financial decisions based on their shareholders’ religious beliefs that have a direct influence on the company’s profitability.
Alhomaidi, A., Hassan, M. K., Hippler, W. J., & Mamun, A. (2019). The impact of religious certification on market segmentation and investor recognition. Journal of Corporate Finance, 55, 28-48. Web.