DOES ISLAMIC FINANCE FOLLOW FINANCIAL HIERARCHY? EVIDENCE FROM THE MALAYSIAN FIRMS

Mamoru Nagano ()
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Mamoru Nagano: Faculty of Economics, Seikei University, 3-3-1 Kichijoji Kitamachi Musashino City, Tokyo 180-8633, Japan

The Singapore Economic Review (SER), 2022, vol. 67, issue 01, 511-540

Abstract: Focusing on the sukuk market in Malaysia from 2000–2017, this study estimates the degree of each sample issuer information asymmetry and investigates how it influences sukuk issuance and how it differs by sukuk type. First, we find that a cost-plus-sales-based Murabahah sukuk is available for all sukuk issuers, even though the degree of information asymmetry is high. Second, a lease-based Ijarah sukuk can be chosen by high information asymmetric firms only when the firm has qualified collateral assets. Third, only a low information asymmetric firm can choose a profit-and-loss sharing-based Musyarakah sukuk. Therefore, we conclude that sukuk issuance also follows a financial hierarchy in accordance with the agency costs of each financial methodology required when a specific sukuk is chosen.

Keywords: Sukuk issuance; information asymmetry; Murabahah sukuk; Ijarah sukuk; Musyarakah sukuk (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217590821420030

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