Three-way interaction moderation model of legal origin in strengthening the role of firm characteristics in choice of sukuk type

Datien Eriska Utami

Journal of Islamic Accounting and Business Research, 2023, vol. 16, issue 2, 305-320

Abstract: Purpose - This study aims to learn how a three-way interaction moderation model is used to analyse the role of country-specific characteristics, in the form of the implementation ofSharialaw and legal origin in a particular country, in the choice ofsukuktype. Design/methodology/approach - The firm profitability and firm leverages of sukuk issuer are used as the firm characteristics that can influence the choice of sukuk type betweenMudharaba sukuk,Ijara sukukandMurabaha sukuk. The research sample of 545 global sukuk issuances, obtained from the IIFS database, includes the issuance ofMudharaba sukuk,Ijara sukukandMurabaha sukukfrom tensukukissuer countries all over the world. Findings - The research results show that the probability of choosingMudharabaandIjara sukukis found in issuers sukuk with a high firm leverage, while the probability of choosingMurabaha sukukis found in issuers sukuk with a high firm profitability. A three-way interaction moderation model is used in this research to explain that sukuk issuers in countries that implementSharialaw and adopt a legal origin common law system will have a higher choice ofMudharabahandIjarah sukuktypes if the firm’s leverage is high. If the firms’ profitability is high, then the sukuk issuer prefersMurabaha sukuk. Research limitations/implications - The use of firm’s characteristic variables is based solely on trade-off theory and pecking order theory. Also, limitations on the implementation ofSharialaw in countries that do not provide opportunities for countries that apply a mixed law system. Practical implications - The role ofSharialaw and common law legal origin is proven, through a three-way interaction model, to strengthen the interaction of the firm leverage and choice ofMudharaba sukuk. Social implications - Legal certainty for Islamic financial institutions is created in the context of ease of investing in sukuk. Flexibility in the structure is also one of the factors that encourage the development of market acceptance of sukuk. The right structure of the sukuk can be used for specific target markets. Originality/value - There has been no study carried out on a three-way interaction moderation model used to analyse the role of country-specific characteristics. The role ofSharialaw and common law legal origin is proven, through a three-way interaction model, to strengthen the interaction of the firm leverage and choice ofMudharaba sukuk.

Keywords: Types of sukuk; Profitability; Leverage; Sharia law; Legal origin (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-11-2022-0308

DOI: 10.1108/JIABR-11-2022-0308

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