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Do the Type of Sukuk and Choice of Shari'a Scholar Matter?

Author

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  • Christophe Godlewski
  • Rima Turk-Ariss
  • Laurent Weill

Abstract

Sukuk, the shari’a-compliant alternative mode of financing to conventional bonds, have expanded considerably over the last decade. We analyze the stock market reaction to two key features of this financial instrument: sukuk type and characteristics of the shari’a scholar certifying the issue. We use the event study methodology to measure abnormal returns for a sample of 131 sukuk from eight countries over the period 2006-2013 and find that Ijara sukuk structures exert a positive influence on the stock price of the issuing firm. We observe a similar positive impact from shari’a scholar reputation and proximity to issuer. Overall our results support the hypotheses that the type of sukuk and the choice of scholars hired to certify these securities matter for the market valuation of the issuing company.

Suggested Citation

  • Christophe Godlewski & Rima Turk-Ariss & Laurent Weill, 2014. "Do the Type of Sukuk and Choice of Shari'a Scholar Matter?," IMF Working Papers 14/147, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:14/147
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    References listed on IDEAS

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    1. Najeeb, Syed Faiq & Ibrahim, Shahul Hameed Mohamed, 2014. "Professionalizing the role of Shari'ah auditors: How Malaysia can generate economic benefits," Pacific-Basin Finance Journal, Elsevier, vol. 28(C), pages 91-109.
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    7. Godlewski, Christophe J. & Turk-Ariss, Rima & Weill, Laurent, 2013. "Sukuk vs. conventional bonds: A stock market perspective," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 745-761.
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    10. Saiful Azhar Rosly, 2010. "Shariah parameters reconsidered," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 3(2), pages 132-146, June.
    11. di Mauro, Filippo & Ongena, Steven & Caristi, Pierluigi & Couderc, Stéphane & di Maria, Angela & Ho, Lauren & Grewal, Beljeet Kaur & Masciantonio, Sergio & Zaher, Sajjad, 2013. "Islamic finance in Europe," Occasional Paper Series 146, European Central Bank.
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    Cited by:

    1. Naifar, Nader & Hammoudeh, Shawkat & Al dohaiman, Mohamed S., 2016. "Dependence structure between sukuk (Islamic bonds) and stock market conditions: An empirical analysis with Archimedean copulas," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 148-165.
    2. repec:bla:worlde:v:41:y:2018:i:3:p:699-722 is not listed on IDEAS
    3. Paul-Olivier KLEIN & Rima TURK & Laurent WEILL, 2017. "How Religiosity Shapes Investor Behavior: Sukuk Issuances During Ramadan," Working Papers of LaRGE Research Center 2017-01, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    4. Ashraf, Dawood & Rizwan, Muhammad Suhail & Azmat, Saad, 2018. "The Role of Ownership and Governance Mechanism in Sukuk Financing by Malaysian Firms: An Application of A Double Selection Model," Working Papers 2018-2, The Islamic Research and Teaching Institute (IRTI).
    5. Naifar, Nader & Hammoudeh, Shawkat, 2016. "Do global financial distress and uncertainties impact GCC and global sukuk return dynamics?," Pacific-Basin Finance Journal, Elsevier, vol. 39(C), pages 57-69.
    6. Nagano, Mamoru, 2017. "Sukuk issuance and information asymmetry: Why do firms issue sukuk?," Pacific-Basin Finance Journal, Elsevier, vol. 42(C), pages 142-157.
    7. repec:mbr:jmonec:v:10:y:2015:i:3:p:1-28 is not listed on IDEAS
    8. Paul†Olivier Klein & Laurent Weill & Christophe J. Godlewski, 2018. "How sukuk shapes firm performance," The World Economy, Wiley Blackwell, vol. 41(3), pages 699-722, March.
    9. repec:eee:jeborg:v:138:y:2017:i:c:p:50-62 is not listed on IDEAS
    10. repec:eee:quaeco:v:68:y:2018:i:c:p:73-84 is not listed on IDEAS
    11. repec:mbr:jmonec:v:10:y:2015:i:3:p:73-85 is not listed on IDEAS
    12. repec:eee:pacfin:v:48:y:2018:i:c:p:99-111 is not listed on IDEAS
    13. Naifar, Nader & Mroua, Mourad & Bahloul, Slah, 2017. "Do regional and global uncertainty factors affect differently the conventional bonds and sukuk? New evidence," Pacific-Basin Finance Journal, Elsevier, vol. 41(C), pages 65-74.
    14. Ayturk, Yusuf & Asutay, Mehmet & Aksak, Ercument, 2017. "What explains corporate sukuk primary market spreads?," Research in International Business and Finance, Elsevier, vol. 40(C), pages 141-149.
    15. Mariam El Hamiani Khatat, 2016. "Monetary Policy in the Presence of Islamic Banking," IMF Working Papers 16/72, International Monetary Fund.

    More about this item

    Keywords

    External financing; Financial instruments; Bonds; Bond issues; Islamic finance; Islamic banking; Stock markets; Financial Istruments; Shari’a Scholars; ijara; sukuk; stock market; murabaha; Comparative Analysis of Economic Systems;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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