Do the Type of Sukuk and Choice of Shari'a Scholar Matter?

Author/Editor:

Christophe Godlewski ; Laurent Weill ; Rima Turk Ariss

Publication Date:

August 11, 2014

Electronic Access:

Free Full text (PDF file size is 566 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Sukuk, the shari’a-compliant alternative mode of financing to conventional bonds, have expanded considerably over the last decade. We analyze the stock market reaction to two key features of this financial instrument: sukuk type and characteristics of the shari’a scholar certifying the issue. We use the event study methodology to measure abnormal returns for a sample of 131 sukuk from eight countries over the period 2006-2013 and find that Ijara sukuk structures exert a positive influence on the stock price of the issuing firm. We observe a similar positive impact from shari’a scholar reputation and proximity to issuer. Overall our results support the hypotheses that the type of sukuk and the choice of scholars hired to certify these securities matter for the market valuation of the issuing company.

Series:

Working Paper No. 14/147

Subject:

English

Publication Date:

August 11, 2014

ISBN/ISSN:

9781498398794/1018-5941

Stock No:

WPIEA2014147

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

25

Please address any questions about this title to publications@imf.org