What Influences Stock Market Reaction to Sukuk Issues? The Impact of Scholars and Sukuk Types
26 Pages Posted: 19 Feb 2014
Date Written: February 18, 2014
There is a large expansion of sukuk, the shari’a-compliant alternative mode of financing compared to conventional bonds, in the recent years. We analyze if the stock market reaction to sukuk issues is influenced by two key features of these instruments: the sukuk type, and the characteristics of scholar advisors. To do so, we use the event study methodology to measure abnormal returns on a sample of 131 sukuk from eight countries over the period 2006-2013. We find that Ijara sukuk has a positive influence on the stock market reaction. We observe that reputation and proximity of scholars exert a positive impact on the stock market reaction following sukuk issue. Overall our results support the view that the choice of sukuk type and of scholars hired to certify sukuk matters for market valuation of the issuing company.
Keywords: financial instruments, Islamic finance
JEL Classification: G14, P51
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