Impact of short and medium term investment concentration on earnings and dividend distribution: Evidence from Islamic Banks in Bangladesh

Abstract

The aim of Islamic banking is to ensure interest-free banking system. To achieve the aim, Islamic banks use various modes of transactions as replacement of interest based system. Among the modes, some are short term and medium term and some are long-terms in nature. The study aimed at evaluating different investment modes to find investment concentration of Islamic banks in their portfolio. Secondary sources of data have been used to facilitate the research where a few persons were interviewed for some first-hand data related to investment modes. This study revealed that the investment portfolio of Islamic banks in Bangladesh mainly concentrates on short and medium-term investment which contributes to earning reasonable returns. These reasonable returns ensure stable dividend to the shareholders of Islamic banks in Bangladesh. This paper also discovered a significantly higher return of short and medium period investment than long-term based investment.