REVISITING THE SPEED OF CAPITAL STRUCTURE ADJUSTMENT IN ISLAMIC FIRMS: A SYSTEMATIC LITERATURE REVIEW AND RESEARCH AGENDA

Abstract

This study systematically reviews the development of research on the Speed of Adjustment (SOA) within the context of Islamic finance, with a focus on identifying the dominant determinants and analytical models employed in empirical investigations. The review was conducted using a Systematic Literature Review (SLR) approach guided by the PRISMA 2020 protocol, covering 22 Scopus-indexed articles published between 2015 and 2025. The findings reveal an upward trend in publication activity beginning in 2018, with notable peaks in 2019 and 2025. Internal factors such as profitability, firm size, growth, asset tangibility, and liquidity emerge as the primary determinants of SOA, whereas macroeconomic stability, regulatory strength, and Shariah compliance strengthen the capital adjustment mechanism. The most frequently applied analytical models include the Partial Adjustment Model (PAM) and System-GMM, followed by VECM and Fixed Effect Panel Regression, although methodological diagnostic reporting remains inconsistent across studies. The synthesis further indicates that SOA research on Shariah-compliant firms is still evolving, leaving substantial space for conceptual, empirical, and methodological expansion. Future research may focus on comparative analyses between Shariah-compliant and conventional firms, the integration of ESG factors, and the development of an Islamic Dynamic Capital Adjustment Model grounded in maqasid al-shariah principles. Methodologically, subsequent studies are encouraged to employ Panel Quantile Regression or Bayesian Dynamic Panel Models and to incorporate bibliometric analysis and big data analytics to enhance scientific validity and research novelty.