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Why do companies issue sukuk ?
Author(s) -
Klein PaulOlivier,
Weill Laurent
Publication year - 2016
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2016.05.003
Subject(s) - sukuk , adverse selection , information asymmetry , moral hazard , bond , logit , debt , business , monetary economics , bond market , economics , financial system , financial economics , islamic finance , actuarial science , econometrics , finance , incentive , microeconomics , islam , philosophy , theology
This paper investigates the determinants for firms to choose sukuk over conventional bond. We investigate the potential impact of information asymmetries through moral hazard and adverse selection to explain why firms prefer using sukuk . We perform logit regressions of the choice of debt type to determine which characteristics lead a firm to issue a sukuk rather than a bond. We use a dataset of sukuk and conventional bond issuances in Malaysia from 2004 to 2013. We find evidence of the influence of information asymmetries and adverse selection on the choice of the sukuk market.