Yield spread determinants of sukuk and conventional bonds

Momna Saeed, Marwa Elnahass, Marwan Izzeldin and Mike Tsionas

Economic Modelling, 2021, vol. 105, issue C

Abstract: Despite increased economic turmoil over the past few years, the Islamic financial sector including sukuk has shown tremendous growth and stability. This study examines the yield spread determinants of sukuk and conventional bonds. We comparatively assess the effects of firm- and industry-specific variables, bond characteristics, and macroeconomic conditions on the yield. Our sample data features bonds and sukuk of different maturities issued by 58 publicly traded (listed) firms in Malaysia. For sukuk, primary determinants are the firm-specific indicators which indicate lower yield spreads. Moreover, sukuk spreads do not widen with equity volatility, making them less risky than conventional bonds. For conventional bonds, both firm-level and bond-specific characteristics significantly affect yield spreads. Higher financial leverage with shorter maturity is associated with low yields and low spreads. Findings in this study present new insights and important policy implications for investors trading in and regulators governing sukuk and conventional bonds.

Keywords: Sukuk; Islamic bonds; Conventional bonds; Yield spreads (search for similar items in EconPapers)
JEL-codes: E44 F30 G15 N20 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999321002534
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:105:y:2021:i:c:s0264999321002534

DOI: 10.1016/j.econmod.2021.105664

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().