An adaptable service system adjusts to the operational-level environments of organisations to enable heterogeneous services. This adaptation is important for sustainability and contextual-value (benefit) creation in a service system. Academics, such as those related to the current service-ecosystem concept, acknowledge the significance of this adaptation. However, little is known about a comprehensive adaptation process and how that integrates within a design for a service system. Also, practitioners are inclined towards this development, as the financial regulator in Pakistan has established an “evolutionary framework”. This framework encourages financial institutions to design Shariah finance services (SFS) which respond and evolve to the emergent market environments. The existing SFS models take benefit from Islamic jurisprudence and economics literatures to provide designs for transactions of financial and physical assets. However, the SFS models de-emphasis the intangible service-elements, where the adaptation is more likely to occur. Currently there is a great need for models that could explain the detailed adaptation process and its placement in an SFS design. The aim of this research is to develop, evaluate and theorise a model for conceptualising a holistic adaptable service-system design. The research aim is achieved through the proposal of a novel deferred service-system design (DSD) model. The DSD conceptualises a service-system design that adapts to the operational-level environments of SFS organisations in Pakistan. The DSD has seven constructs: (i) the service creators apply centrally-planned designs to create a service ii) they adapt these designs to meet the requirements of emergent contexts (iii) the service personnel, customers and aiding parties co-create a service by integrating their (iv) roles and actions, (v) resources and usufructs, (vi) rules and control to generate (vii) value. DSD is based on service-system design (SSD) literature, SFS literature and theory of deferred action (TODA)  a theory of system and organisation design. A multiple case study strategy is employed to evaluate, extend and theorise the DSD developed in phase I. Qualitative data are collected in four SFS organisations: Islamic commercial bank, Islamic life Takaful, Islamic mutual fund, and Islamic leasing organisation. Thirty-two in-depth narrative interviews of SFS personnel are conducted and analysed using a narrative discourse analysis method. The findings are triangulated by adding focus-group discussions, visualisations and service offering documents. The empirical findings are synthesised with the extant literature to develop a novel and comprehensive DSD in phase II. The findings show that the service co-creators apply a centrally-developed planned design typology (PDT). PDT includes different blends of SFS models (e.g., partnerships, sales, leases, agency and endowment), expected varieties (list, range and negative) and addable-deductible modules. The service co-creators and their inclusive systems (e.g., families, societies, markets, regulators and other government agencies) affect the planned service-system design to adapt or migrate. The service co-creators follow a novel six-step deferred adaptation process (DAP): emergence locale, information diffusion, knowledge diffusion, indexation, specifics evaluation and adaptation/migration. The empirical findings advance our understanding of a service-system design by showing how a planned design enables adaptation through PDT. More importantly, how the service co-creators follow a systematic process, DAP, to attain the desired adaptation or migrate off the scene. The findings also broaden the conceptualisation of SFS by showing how it is co-created by the financial institutions, customers and aiding parties. This is due to the SFS being perceived as a product of financial institution alone. This research also makes a contribution to service visualisation method by extending and using the service blueprint as an additional data-collection and analysis tool. This study provided fourteen implications for the practitioners.

The main purpose of this dissertation is to lessen the gap in the Islamic finance and investment literature by providing new answers to the most vital question raised in that literature: Is the adherence to the Shariah law associated with at any cost? The first chapter provides a primer on Islamic finance. It discusses several restrictions and necessary adaptations that must be made to have a Shariah-compliant product. The takeaway is that Shariah law mandates is related to fundamentals and, thus has a direct effect on the risk-return profile of all sorts of different products. This is referred to as the “Islamic-effect.” The second chapter investigates that Islamic-effect in a cross-sectional stock return context. This is done in two steps. First, looking at differences in stock returns between Islamic and conventional firms in Saudi Arabia during the period from January 2003 to April 2011. Results indicate that there is a negative relationship between Saudi Islamic firms and average returns. This is referred to as the “negative Islamic-effect.” Second, examine whether that negative Islamic-effect is considered a common, systematic, and undiversified risk factor that affects cross-sectional expected stock returns. Time-series regressions results indicate that the Islamic risk factor (CMI) does indeed capture strong common variation in Saudi stock returns regardless what is included in the model. Also, findings suggest that using a four-factor model that controls for the Islamic-effect is more appropriate than using a single- or a three-factor model in Islamic finance applications that require estimates of expected stock returns. The third chapter investigates the Islamic-effect in a mutual fund context. A unique sample of 143 Saudi mutual funds (96-Islamic and 47-conventional) is used to assess the performance and riskiness of Saudi Islamic funds relative to Saudi conventional funds and relative to different Islamic and conventional indices for the period from July 2004 to January 2010. Findings suggest that there is a benefit (cost) from adhering to the Shariah law when locally-focused (internationally-focused) fund portfolios are investigated. When Arab-focused fund portfolios are investigated, findings suggest that there is neither a cost nor a benefit from adhering to the Shariah law.

Corporate governance practice differs regionally and nationally, depending on how each legal environment protects minority investors, capital markets and company ownership structure. Governance can also change spectacularly in regions or countries with comparatively high levels of institutional investment. The notion of institutional investors' activism is increasingly important in developed markets as the ideal corporate governance mechanism to monitor corporate managers and overcome agency problems arising from dispersed corporate ownership in modern companies. These institutions can work together on an improved corporate governance framework more effectively than individual investors, monitoring corporate controllers of listed companies in emerging and developing markets, using their influence more vigorously and in ways more fitting to a concentrated ownership environment such as that in Saudi Arabia. Consequently, the role of institutional investors in emerging and developing markets will depend strongly on institutional investors' activism and the arrangements determined and undertaken by the corporate governance regulatory framework in these markets. In considering the influential role of institutional investors to improve corporate governance practice, a high level of minority shareholder protection thus remains an indicator of good corporate governance and regulatory pressure of rights and incentives, which are necessary to empower non-controlling shareholders in these concentrated ownership markets to exert a strong activist influence in monitoring corporate activities, thus improving the corporate governance practices of investee companies. In this context, this thesis contends that in Saudi Arabia in particular, shareholder involvement in corporate governance is inadequate, as a result of a variety of economic and regulatory obstacles. It goes on to identify what improvements are necessary and where, to ensure a sound framework for effective institutional investor activism and to improve the level of minority shareholder protection. It also cautions Saudi legislators against erecting hurdles to the future engagement of Saudi and foreign institutional investors in monitoring corporate activities which may affect the conditions for access, allocation and monitoring of equity, which is so important for value creation and sustainable economic growth. The main benefit to be derived from this research is that it facilitates a fuller understanding of the Saudi approach to corporate governance, the corporate ownership environment and trends in the capital market. The analysis also deepens knowledge of corporate governance regimes, including the role of institutional investors, and of their characteristics and investment behaviours. In short, it considers whether institutional investors are willing or have been encouraged to use their power to engage in the companies in which they invest and whether they are qualified to solve the agency problem.