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Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models

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dc.contributor.authorMohamed, Hisham Hanifa
dc.contributor.authorMohammed Masih, Abul Mansur
dc.contributor.authorObiyathulla Ismath Bacha
dc.date.accessioned2016-06-06
dc.date.accessioned2016-07-25T19:25:46Z
dc.date.available2016-06-06
dc.date.available2016-07-25T19:25:46Z
dc.date.disclosure2016-06-10
dc.date.issued2015
dc.description.abstractAlthough sukuk has been dominating the Malaysian capital market, the motivations of the firms issuing sukuk or conventional bonds remained largely unexplored. Using the partial adjustment model, we make the initial attempt, to test a firm's target debt optimizing behavior and secondly, to find the firm specific determinants of target debt ratio using a sukuk or conventional bond issuance 3 dataset. Our sample consists of 120 conventional bonds and 80 sukuk issuers from 2000 to 2012. We employ two recent dynamic panel data estimators, 4 which resulted in three major findings. Firstly, our results provide stronger support for trade-off view based on a firm's optimizing behavior among sukuk and conventional bond issuers, however with different issuance motives. Secondly, issuers of partnership-based sukuk and convertible bonds closely follow the pecking order view, in which the former is chosen based on firms facing a higher information asymmetry cost. Finally, while both exchange-based sukuk and straight bond issuers align towards a particular target, only firms with higher sales growth prefer the former. Reinforced by industry insights, our findings evidence that the sukuk offers bring unique “benefits” to corporate issuers unlike those of the conventional bonds.
dc.identifier.citationMohamed, Hisham Hanifa and Mohammed Masih, Abul Mansur and Bacha, Obiyathulla Ismath. (2015). Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models. Pacific-Basin Finance Journal, 34, pp. 233–252.
dc.identifier.doihttps://doi.org/10.1016/j.pacfin.2015.02.004
dc.identifier.urihttps://ikr.inceif.org/handle/INCEIF/1321
dc.languageEnglish
dc.language.isoeng
dc.publisherElsevier
dc.rights2015. Elsevier
dc.sourceCRP
dc.subjectSukuk
dc.subjectConventional bonds
dc.subjectTrade-off theory
dc.subjectPecking order theory
dc.titleWhy do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models
dc.typeJournal Article
dlc.maintopicIslamic capital markets
dlc.subtopicSukuk
dspace.entity.typePublication
ikr.doctypeScholarly Works
ikr.docurlhttp://www.sciencedirect.com/science/article/pii/S0927538X1500027X
ikr.topic.maintopicIslamic capital markets
ikr.topic.subtopicIslamic capital markets
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