Issuer's choice of Islamic bond type
Saad Azmat,
Michael Skully and
Kym Brown
Pacific-Basin Finance Journal, 2014, vol. 28, issue C, 122-135
Abstract:
This paper analyses factors affecting an issuer's choice of Islamic bond structure as compared with conventional financial instruments. This choice is considered in the context of issuer firm variables, the 2008 Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFIs) Islamic bond recommendations, and Shariah advisor effect in relation to Islamic instruments. A sample of Malaysian Islamic bonds is analysed using ordered probit model techniques. The results suggest that there are some significant differences between Islamic and conventional bond issuer's choice determinants which can be attributed to characteristics specific to Islamic bonds. For instance unlike conventional bonds, the stock valuation of the issuer did not impact debt–equity targets with Islamic joint venture (IJV) bond issuance. Other results from issuer firm characteristics were mixed and suggest that IJV bonds have little in common with equity and issuers should concentrate on a bond's security and seniority as with conventional bonds, rather than their Islamic structure. Secured against real asset (SARA) bonds were found not to always represent ownership of the underlying asset. AAOIFIs reported concerns in 2008 over Shariah quality of IJV bonds appear to have led to an aversion of IJV bond issuance. Finally, Shariah committees as opposed to individual Shariah advisors demonstrated an aversion to IJV bond issuance.
Keywords: Bond structure; Islamic bonds (search for similar items in EconPapers)
JEL-codes: G15 G24 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X13000516
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:pacfin:v:28:y:2014:i:c:p:122-135
DOI: 10.1016/j.pacfin.2013.08.008
Access Statistics for this article
Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee
More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().