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Are Islamic Investment Certificates Special? Evidence on the Post-Announcement Performance of Sukuk Issues


  • Christophe J. Godlewski

    (LaRGE Research Center, Université de Strasbourg)

  • Rima Turk-Ariss

    (Lebanese American University)

  • Laurent Weill

    () (LaRGE Research Center, Université de Strasbourg)


The last decade has witnessed rapid expansion of Islamic financial instruments, notably with the proliferation of Islamic investment certificates called Sukuk. Sukuk generally represent the Islamic financial instrument equivalent to conventional bonds. We evaluate the economic differences between these financing techniques and appraise the implications on the future expansion of Sukuk. We use a market-based approach to investigate whether investors react differently to the announcements of issues of Sukuk and conventional bonds. We find that the stock market is neutral to the announcement of conventional bonds, but we observe a significant negative stock market reaction to the announcement of Sukuk. We explain this different stock market reaction using the adverse selection mechanism, which favors Sukuk issuance by lower-quality debtor companies. Unlike arguments presented in prior literature, our results support the view that differences exist between Sukuk and conventional bonds because the market is able to distinguish among these securities.

Suggested Citation

  • Christophe J. Godlewski & Rima Turk-Ariss & Laurent Weill, 2010. "Are Islamic Investment Certificates Special? Evidence on the Post-Announcement Performance of Sukuk Issues," Working Papers of LaRGE Research Center 2010-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
  • Handle: RePEc:lar:wpaper:2010-05

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    Cited by:

    1. Shaikh, Salman & Saeed, Shan, 2010. "Sukuk Bond: The Global Islamic Financial Instrument," MPRA Paper 26700, University Library of Munich, Germany.

    More about this item


    Financial instruments; Islamic finance; sukuk; event studies.;

    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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