Islamic Investment and Financial Performance: The Role of Sharia-Compliant Investment Practices

Titik  Alawiyah

doi:10.53491/papua.v3i2.2282

Authors

Titik Alawiyah Universitas Negeri Surabaya

DOI:

https://doi.org/10.53491/papua.v3i2.2282

Keywords:

Islamic investment; Sharia compliance; financial performance; Islamic finance; investment practices; risk management.

Abstract

This study examines the role of Sharia-compliant investment practices in shaping financial performance within the Islamic finance framework. The increasing development of Islamic investment has generated growing interest in understanding how religious compliance, ethical considerations, and financial management contribute to sustainable investment outcomes. This study employs a qualitative approach using a multiple-case study orientation to explore the mechanisms through which Sharia principles are incorporated into investment decision-making. Data are conceptually examined through five dimensions: business activity screening, financial screening, ethical investment practices, Sharia governance and transparency, and investment risk management. The analysis indicates that Sharia-compliant investment practices have the potential to strengthen financial discipline, improve investment transparency, enhance institutional accountability, and support risk management. These mechanisms may contribute to financial performance through improved investment selection, stronger governance, and more sustainable capital allocation. However, Sharia compliance does not necessarily guarantee higher profitability, as financial outcomes remain influenced by market conditions, corporate characteristics, and investment management effectiveness. This study contributes to Islamic finance literature by conceptualizing Sharia-compliant investment as an integrated framework that connects religious principles, ethical responsibility, and financial performance.

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