Determinants of Islamic Bond (Sukuk): Evidence in Malaysia

23 Pages Posted: 18 Aug 2013 Last revised: 19 Aug 2013

See all articles by Rusmawati Said

Rusmawati Said

Universiti Putra Malaysia

Wan Nurhanan W. Suhaimi

Universiti Sains Islam Malaysia (USIM)

Asmaddy Haris

Universiti Sains Islam Malaysia (USIM)

Date Written: August 17, 2013

Abstract

The virtual isolation of Islamic financial markets from 2008’s financial crisis prompted a quest to find the underlying determinants that stabilise the market’s liquidity. Utilising data from the Malaysian bond market, the paper first provides insight into the trend and liquidity of the sukuk market before analysing sukuk’s liquidity level by using the latent liquidity measurement. This is followed by a random effect regression to determine the liquidity drivers for sukuk. Four variables (issuance amount, maturity, coupon rate and age) are found to be significant drivers of sukuk’s liquidity level. The conclusions drawn from the regression results indicate that sukuk’s investors favour to match long term sukuk with their long term liabilities. In addition they also like to keep their sukuk to amortise the return.

Keywords: Sukuk, Islamic bond, liquidity, latent liquidity, Malaysia

JEL Classification: G19, G28, C19

Suggested Citation

Said, Rusmawati and W. Suhaimi, Wan Nurhanan and Haris, Asmaddy, Determinants of Islamic Bond (Sukuk): Evidence in Malaysia (August 17, 2013). Available at SSRN: https://ssrn.com/abstract=2311835 or http://dx.doi.org/10.2139/ssrn.2311835

Rusmawati Said (Contact Author)

Universiti Putra Malaysia ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

Wan Nurhanan W. Suhaimi

Universiti Sains Islam Malaysia (USIM) ( email )

Bandar Baru Nilai
Nilai, Negeri Sembilan 71800
Malaysia

Asmaddy Haris

Universiti Sains Islam Malaysia (USIM) ( email )

Bandar Baru Nilai
Nilai, Negeri Sembilan 71800
Malaysia

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