Arrangers’ Identity and the Syndicate Structure of Sukuk

Zairihan Abdul Halim (), Nadisah Zakaria (), Roza Hazli Zakaria () and Hazman Samsudin ()
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Zairihan Abdul Halim: School of Social and Economic Development Universiti Malaysia Terengganu 21030 Kuala Nerus Terengganu MALAYSIA
Nadisah Zakaria: College of Business Administration Prince Sultan University P.O. Box 66833 Riyadh 11586 KINGDOM OF SAUDI ARABIA
Roza Hazli Zakaria: Faculty of Economics and Administration University of Malaya 50603 Kuala Lumpur MALAYSIA
Hazman Samsudin: School of Social and Economic Development, Universiti Malaysia Terengganu 21030 Kuala Nerus Terengganu MALAYSIA

Jurnal Ekonomi Malaysia, 2018, vol. 52, issue 1, 243-256

Abstract: The participation of multiple banks and financial institutions in a sukuk (Islamic bonds) issuance reflects a successful process of negotiation of contract terms between the issuer, lead arranger, and other financial institutions. Conventional finance literature suggests that certain banks or non-bank institutions possess unique characteristics that give them a competitive advantage in screening and monitoring debt contracts. Whether or not their uniqueness contributes to the structure of sukuk syndicate is still an empirical question. Therefore, this paper examines the relation between arranger identity and the structure of sukuk syndicate for a sample of 3,462 sukuk tranches. Results of multiple Poisson regressions indicate the certification effect of arrangers where more reputable banks are associated with a larger syndicate size (the number of participant financial institutions). Non-bank institutions are also positively related to the size of syndicate, and this relation is more pronounced for private firms. This implies that such institutions are gaining specialization in screening and monitoring risky contracts. Further, Islamic financial institutions (IFIs) play a limited role in sukuk syndication. One promising avenue for IFIs to build their capacity to assume the role of lead arranger, as the results suggest, is to actively engage reputable conventional banks and non-bank institutions in their syndicated financing activities.

Keywords: Islamic bond; Syndication; arranger identity; certification eff (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ukm:jlekon:v:52:y:2018:i:1:p:243-256

DOI: 10.17576/JEM-2018-5201-20

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