Societal trust and Sukuk activity

Posted: 13 Jun 2019 Last revised: 12 Jul 2021

See all articles by Saqib Aziz

Saqib Aziz

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

Sukuk investments require investors and issuers to adhere to subtle moral and ethical
standards beyond following mere profit maximization objectives. Investor trust
manifested through the level of societal trust could be vital in the global Sukuk investment
surge. This study investigates the relationship between the societal trust level and
Sukuk activity. It employs a global sample of Sukuk issuances spanning over
2001–2019 and finds that a country’s societal trust level significantly and positively
influences the amount of Sukuk issued. Moreover, this positive effect supersedes the
negative effects of higher information asymmetry associated with equity-based Sukuk
or Sukuk issued by risky firms. Ultimately, trust is both a deterrent and critical for
Islamic finance success.

Keywords: Trust, Sukuk, Islamic Finance, Culture

JEL Classification: G15, G32, Z19

Suggested Citation

Aziz, Saqib and Ashraf, Dawood and El-Khatib, Rwan, Societal trust and Sukuk activity (May 30, 2019). Journal of International Financial Markets, Institutions and Money, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3396690 or http://dx.doi.org/10.2139/ssrn.3396690

Saqib Aziz (Contact Author)

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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