Determinant of Sukuk Ratings

Tika Arundina and Dato’ Mohd. Azmi Omar
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Tika Arundina: IIUM
Dato’ Mohd. Azmi Omar: IIUM

Bulletin of Monetary Economics and Banking, 2009, vol. 12, issue 1, 97-114

Abstract: With the development of sukuk market as the Islamic alternatives of the existing bond market, the issue of how to assign a rating to the sukuk issuance rises. This study tries to provide an empirical foundation for the investors to estimate the ratings assign. Using approach from several rating agencies, past researches on bond ratings, financial distress prediction and bankruptcy prediction models, this study is trying to innovate a new model on determining the sukuk ratings. It used Multinomial Logit regression to create a model of rating probability from several theoretical variables, ie. firm size, leverage, profitability, fixed payment coverage, reputation and existence of guarantor. The result shows 80% of all valid cases are correctly classified into their original rating classes.

Keywords: Sukuk; Rating (search for similar items in EconPapers)
JEL-codes: C35 E43 P43 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:12:y:2009:i:1h:p:97-114

DOI: 10.21098/bemp.v12i1.468

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