Why do companies issue sukuk?

Paul-Olivier Klein and Laurent Weill

Review of Financial Economics, 2016, vol. 31, issue C, 26-33

Abstract: This paper investigates the determinants for firms to choose sukuk over conventional bond. We investigate the potential impact of information asymmetries through moral hazard and adverse selection to explain why firms prefer using sukuk. We perform logit regressions of the choice of debt type to determine which characteristics lead a firm to issue a sukuk rather than a bond. We use a dataset of sukuk and conventional bond issuances in Malaysia from 2004 to 2013. We find evidence of the influence of information asymmetries and adverse selection on the choice of the sukuk market.

Keywords: Financial instruments; Islamic finance; Debt issuance; Emerging countries (search for similar items in EconPapers)
JEL-codes: G14 P51 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:revfin:v:31:y:2016:i:c:p:26-33

DOI: 10.1016/j.rfe.2016.05.003

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