International issuance of Sukuk and companies' systematic risk: An empirical study

Abstract

The study provides international empirical evidence that sukuk securitization positively impacts the systematic risk increase for originator companies. Using a market-based analysis of 68 sukuk issuances during 2004–2020, the study starts by dividing the full sample of sukuk by the announcement and issue dates of transactions. This paper shows the different model parameters of systematic risk before, during, and after the event window, allowing systematic risk to change gradually within the event windows. The main findings show a decrease in systematic risk before the announcement dates and issuance of sukuk for a window of −/+5 days, which can be explained by the perception of the transfer of risk from originators to sukuk holders when companies decide to finance new projects with sukuk. The post-event increase in systematic risk can be explained because companies tend to invest liquidity in risky assets, which affects the change in capital structure and financial leverage.