Determinants of Islamic Bond (Sukuk): Evidence in Malaysia
23 Pages Posted: 18 Aug 2013 Last revised: 19 Aug 2013
Date Written: August 17, 2013
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: Suggested Citation