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Are Islamic bonds different from conventional bonds? International evidence from capital market tests

Author

Listed:
  • Nafis Alam
  • M. Kabir Hassan
  • Mohammad Aminul Haque

Abstract

Islamic bonds (Sukuk) emerged as an innovative capital market instrument over the last decade. This paper investigates the impact of conventional bonds and Sukuk announcement on shareholder wealth and their determinants using 79 Sukuks and 87 conventional bonds over the period of 2004e2012 in six developed Islamic financial market. The overall time frame is divided into three parts, 2004e2006 (before crisis); 2007e2009 (during crisis) and 2010e2012 (after crisis). It is revealed that the market reaction is negative for the announcements of Sukuk before and during 2007 global financial crisis. On the other hand market reaction is positive for announcement of conventional bond before the crisis period and negative during and after crisis periods. The size of bond offering appears to have a negative impact on the cumulative abnormal return in case of Sukuk and positive in case of conventional bond.

Suggested Citation

  • Nafis Alam & M. Kabir Hassan & Mohammad Aminul Haque, 2013. "Are Islamic bonds different from conventional bonds? International evidence from capital market tests," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 13(3), pages 22-29, September.
    • Handle: RePEc:bor:bistre:v:13:y:2013:i:3:p:22-29
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    More about this item

    Keywords

    Sukuk; Abnormal return; Capital structure;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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