Islamic Securities in Corporate Financial Hierarchy

32 Pages Posted: 3 Aug 2020

See all articles by Sara Al Balooshi

Sara Al Balooshi

University of Bahrain ; University of St Andrews

Maria Chiara Iannino

University of St Andrews

Pejman Abedifar

University of St Andrews - School of Management; Khatam University - Tehran Institute for Advanced Studies; Khatam University

Date Written: June 31, 2020

Abstract

In this paper, we investigate the place of Islamic investment securities (sukuk) in firms' financial hierarchy using the modified pecking order theory. We study the external funding preferences of Malaysian firms using quarterly data of 112 firms for the period between 2005 and 2017. We find that when internal funds are exhausted, firms prefer to issue profit-loss sharing sukuk over bonds and fixed income sukuk is placed before equity. The results show that sukuk can widen the external finance spectrum which has important implications for policymakers in countries with dual financial systems.

Keywords: Corporate Capital Structure, Pecking Order, Islamic Finance, Sukuk

JEL Classification: G32, Z12

Suggested Citation

Al Balooshi, Sara and Iannino, Maria Chiara and Abedifar, Pejman, Islamic Securities in Corporate Financial Hierarchy (June 31, 2020). Available at SSRN: https://ssrn.com/abstract=3644234 or http://dx.doi.org/10.2139/ssrn.3644234

Sara Al Balooshi (Contact Author)

University of Bahrain ( email )

P.O Box 32038
Sukhair Campus, 32038
Bahrain

University of St Andrews ( email )

Castle Cliff
St Andrews
St Andrews, KY16 9AR
United Kingdom

Maria Chiara Iannino

University of St Andrews ( email )

School of Economics and Finance
Castlecliffe
St Andrews, KY16 9AL
United Kingdom

Pejman Abedifar

University of St Andrews - School of Management ( email )

The Gateway, North Haugh
St Andrews, Fife KY16 9RJ
United Kingdom

Khatam University - Tehran Institute for Advanced Studies ( email )

Tehran
Iran

Khatam University

Tehran
Iran

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