Date of Award

Summer 8-2019

Degree Type


Degree Name


Degree Program

Financial Economics


Economics and Finance

Major Professor

Hassan, M. Kabir

Second Advisor

Lane, Walter

Third Advisor

Turunen-Red, Arja

Fourth Advisor

Zirek, Duygu


The first chapter evaluates the zero-leverage effect on firms' financial constraints. Moreover, using investment- and cash-to-cash-flow sensitivities as financial constraint indicators, the results suggest that unleveraged firms are expected to face lower constraints relative to leveraged firms. Lastly, the results indicate that the zero-leverage effect on firms’ financial constraints is more likely stronger for smaller firms, zero-dividend firms, firms with lower proportions of tangible assets, and growth firms. The second chapter develops a new quantitative measure that reflects the extent to which a firm complies to Shariah relative to the other firms located in a certain region at a certain time. This measure can be customized to be consistent with each investor’s objectives, constraints, and beliefs. We argue that the use of this measure is preferable to the existing use of ratio thresholds for the following two reasons. First, it is more Shariah-appropriate because it provides the Shariah-compliant investor with a clear understanding of the relative compliance status of each firm he wishes to invest in. Second, it can be incorporated into any portfolio optimization model to create a balance between improving Shariah compliance and not compromising investment returns.


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