Does Trust Level Matter in Sukuk Issuance?

18 Pages Posted: 13 Jun 2019

See all articles by Saqib Aziz

Saqib Aziz

ESC Rennes School of Business

Dawood Ashraf

Islamic Development Bank - Islamic Research and Training Institute

Rwan El-Khatib

Zayed University - College of Business

Date Written: May 30, 2019

Abstract

Rather than focusing on issuer characteristics as done in prior studies, this paper presents a macro-level perspective on the role of societal trust in Sukuk issuance. Using a comprehensive sample of global Sukuk issuances spanning over the period of 2001 to 2018 and controlling for issuer characteristics and Sukuk features, we find that the level of societal trust in a country significantly and positively influences the amount of Sukuk issued. These results hold after controlling for time, industry and country-specific fixed effects and are robust under various settings. Moreover, we also unfold a moderating role of societal trust in (i) mitigating the investor risk perception associated with the Sukuk investments reflected by a decline in the yield to maturity and yield spread on Sukuk issuances and (ii) improving the financial performance of the issuing firms.

Keywords: Trust, Sukuk, Islamic Finance, Culture

JEL Classification: G15, G32, Z19

Suggested Citation

Aziz, Saqib and Ashraf, Dawood and El-Khatib, Rwan, Does Trust Level Matter in Sukuk Issuance? (May 30, 2019). Available at SSRN: https://ssrn.com/abstract=3396690 or http://dx.doi.org/10.2139/ssrn.3396690

Saqib Aziz (Contact Author)

ESC Rennes School of Business ( email )

Rue Robert d'arbrissel, 2
Rennes, 35065
France

Dawood Ashraf

Islamic Development Bank - Islamic Research and Training Institute ( email )

P.O. Box. 9201
Jeddah, 21413
Saudi Arabia

Rwan El-Khatib

Zayed University - College of Business ( email )

Zayed University
P.O. Box 144534
Abu Dhabi
United Arab Emirates

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