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

Godlewski, Christophe J.; Ariss, Rima Turk; Weill, Laurent

doi:10.5089/9781498398794.001

Cited by 29 publications

(37 citation statements)

References 22 publications

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“…The sample gathers 164 sukuk issuances and 645 bond issuances taking place between 1 January 2002 and 31 December 2010. By taking into account all maturities for securities on Malaysia debt market (sukuk and bonds), we extend the sample in comparison with Godlewski et al (2013Godlewski et al ( , 2016. The distribution of issues by industry and by year is displayed in Table 1.…”

Section: Datamentioning

confidence: 99%

How sukuk shapes firm performance

2017

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With the large expansion of Islamic finance in the recent years, sukuk, which are the Sharia‐compliant substitute to conventional bonds, are now becoming more prominent. The aim of this study was to examine the impact of sukuk issuance on firm performance. To do so, we analyse how stock market performance and operating performance (OP) are influenced by issuance of sukuk and bonds on a sample of Malaysian listed companies. We consider the short‐term and medium‐term stock market reaction through the computation of cumulative abnormal returns and buy‐and‐hold abnormal returns. We investigate the impact on OP by performing regressions and by calculating abnormal operating performance (AOP) so that we can compare how issuance affects similar firms. We find that sukuk issuance generates a negative stock market reaction both in the short term and in the medium term. We also find evidence that issuing sukuk hampers OP. The analysis of AOP shows that sukuk issuers have better performance than their matched bond issuers, but that sukuk contributes to reduce the gap in performance over time. Overall, our results support the view that sukuk issuance hampers stock market performance, but that it is not attributable to a signalling effect on the bad financial situation of the issuer. We interpret our findings as evidence of adverse selection taking place on the financed projects and agency problems stemming from the specific sukuk structuring with stock market investors more reluctant to invest in sukuk issuers.

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Section: Datamentioning

confidence: 99%

How sukuk shapes firm performance

2017

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“…diminishing Musharaka and trade with a fixed return). Nowadays, Ijarah and Murabaha Sukuk dominate the market in most of the recent issuance (Hussain et al, 2015;Godlewski et al, 2016;World Bank and Islamic Development Bank Group, 2017). It is noticeable that recent Islamic bond market activities have largely focused on debt-based rather than rewards and risk-sharing instruments.…”

Section: Islamic Sukukmentioning

confidence: 99%

A Review of Islamic Investment Literature

Hassan

Aliyu

Paltrinieri

et al. 2018

J of App Econs and Policy

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This paper reviews the empirical literature on the contemporary issues of Islamic investments and highlights the future research directions. The growing literature during the last several years and the penetration of Islamic investments beyond the Muslim majority countries motivate us to review the empirical studies in the area. We therefore focus our literature review on mutual funds, sukuk and equity investments, analysing 81 articles from the most important journals dealing with the topic. The mixed findings in this area help the understanding of professionals not familiar with Islamic investment to identify the trends of the literature for important decisions. Our results have also important financial implications for asset managers willing to include Islamic financial instruments into a well-diversified portfolio.

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“…Moreover, there are just a few recent papers investigating Islamic corporate governance (Najeeb & Ibrahim, 2014;Ullah et al, 2014;Wooi & Ali, 2017). The only studies attempting to evaluate the impact of Shariah scholar reputation on Islamic finance involve sukuk (Godlewski et al, 2014) and banks (Grassa, 2016;Mollah & Zaman, 2015;Mollah et al, 2017). In the case of sukuk, Godlewski et al (2014) show that the reputation and proximity of Shariah scholars have a beneficial influence on stock market reactions to sukuk issuance.…”

Section: Te Ra Tu R E Re V I Ew a N D Re S Ea R Ch Qu Esti Onmentioning

confidence: 99%

“…The only studies attempting to evaluate the impact of Shariah scholar reputation on Islamic finance involve sukuk (Godlewski et al, 2014) and banks (Grassa, 2016;Mollah & Zaman, 2015;Mollah et al, 2017). In the case of sukuk, Godlewski et al (2014) show that the reputation and proximity of Shariah scholars have a beneficial influence on stock market reactions to sukuk issuance. Grassa (2016) documents that Islamic bank credit ratings are negatively associated with the supervisory role of the Shariah board and positively associated with the Shariah board's independence and expertise.…”

Section: Te Ra Tu R E Re V I Ew a N D Re S Ea R Ch Qu Esti Onmentioning

confidence: 99%

“…Second, we contribute to governance and board composition issues by explicitly considering the impact that the characteristics of Islamic scholars (Ullah et al, 2014) can have on Islamic portfolios through the Islamic screening criteria they impose. In fact, while there are few studies investigating the impact of Shariah boards on Islamic bank performance (Mollah, Hassan, Al Farooque, & Mobarek, 2017;Mollah & Zaman, 2015), ratings (Grassa, 2016) and Islamic bonds, or sukuk (Godlewski, Turk-Ariss, & Weill, 2014), there is a dearth of literature dealing with the impact of Shariah boards on Islamic indices' risk and performance.…”

Section: Introductionmentioning

confidence: 99%

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The effects of Shariah board composition on Islamic equity indices' performance

Hassan

Miglietta

Paltrinieri

et al. 2018

Business Ethics: A Eur Rev

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Based on a sample of 54 Islamic indices over the period 2007–2014, we investigate the effect of Shariah board members' educational background on Islamic indices' risk and return characteristics via the screening criteria. Using a capital asset pricing model benchmark analysis, we assess the sensitivity of Islamic indices to their conventional peers in terms of beta and derive a measure of return (Jensen's alpha). First, we observe that the higher the number of members in common among the boards, the higher the risk–return profile of Islamic indices. Second, commonalities among board members lead to standardization of the screening criteria and to similar Islamic indices' performance. Third, we show that different betas across providers depend on the screening criteria, while the economic educational background of board members affects performance in terms of Jensen's alpha. Our study aims at contributing to the governance literature related to board composition and its importance as a possible driver of performance. In addition, given the impressive growth that Islamic finance has experienced during the last decade, this topic is of great interest to the asset management industry.

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

Cited by 29 publications

References 22 publications

How sukuk shapes firm performance

How sukuk shapes firm performance

A Review of Islamic Investment Literature

The effects of Shariah board composition on Islamic equity indices' performance

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