How Religiosity Shapes Investor Behavior: Sukuk Issuances During Ramadan

Paul-Olivier Klein, Rima Turk Ariss and Laurent Weill
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Paul-Olivier Klein: LaRGE Research Center, Université de Strasbourg

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: We use an original identification strategy to isolate a potential religious bias in traders’ behavior. We first analyze the stock market reaction to sukuk issuance and then isolate the religious component of the trades by comparing the stock market reaction to sukuk and bond issuance during the holy month of Ramadan. We use the event study methodology to measure abnormal returns for a sample of 2,140 issuances by 133 issuers in Malaysia over the period 2000-2013. We find that sukuk issuance during Ramadan is valued more positively than bond issuance by stock market investors. We observe that the type of securities previously issued by the firm influences the stock market reaction, in the sense that the positive reaction to sukuk issuance during Ramadan rewards firms which only issue sukuk. Our findings support the view that religiosity influences the behavior of investors, suggesting that religiosity should be taken into account in the analysis of financial markets.

Keywords: religion; Islamic Finance; Ramadan effect; behavioral finance. (search for similar items in EconPapers)
JEL-codes: G14 P51 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-sea
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Citations: View citations in EconPapers (2)

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