Abstract
2009 was the default year of Malaysian sukuk. It grew larger due to blind market information about defaults, summing up the loss of USD 2.243 billion. Malaysian sukuk market still survived mainly due to petro-dollars and no competition pressure. By 2010, IMF and World Bank were unanimous to say that Malaysia had won the rightly envisioned status of global investment hub. More than 25% of sukuk assets, placed with her and 84% of short term sukuk are in MYR, certainly contributive to her GDP. By 2015 the sukuk market has entered into consolidation phase, with lesser issuances, stark down petroleum prices, sluggish post-crisis economy, down rated MYR, inflation and much higher competitive pressure. Saudi Arabia got IMF support for sukuk and Bahrain doubled its market share in a single year. This time the market forces would not relax Malaysia. Getting lesson from 2009, before the contagion ignites it is the time to check our safety measures against the default. Basing upon the logics drawn from extensive past literature this concept paper sorts the Corporate Governance (CG) and Sustainability (CS) for defensive mechanism against the defaults. Their inter-relation and relation with default risk have been discussed to reach over a conceptualized framework. It was observed that the CG-risk models are alone insufficient to make a plausible conclusion. CS has straightforward defensive role against defaults. But CG is clear to control CS. To say that CG-risk relation is better performed via CS performance. The discussion has been concluded in the managerial implications and directions for future research in the related fields.
Highlights
IMF has reported that Islamic finance has emerged as a reality in the daylight by showing it mettle and resilience against the recent financial crisis
Can the variable of Corporate Social Sustainability (CS) be expected as significant variable here for the discussion of GC and default risk? This study shows in sections that the inclusion of the CS variable can be a good choice
Basing upon the logics drawn from extensive past literature the Corporate Governance (CG) and CS are conceptualized to make the defensive mechanism against the defaults
Summary
IMF has reported that Islamic finance has emerged as a reality in the daylight by showing it mettle and resilience against the recent financial crisis. Its market share is just a niche so far, but its rapid growth has rendered it a significant penetration in the global market and especially in the Asia. The report goes on to state that Islamic finance and maintain its gleam and glosses by making the sukuk markets more efficient and resilient. The sukuks are important for Islamic fiancé since other Islamic financial institutions must depend on it for their liquidity and profitability. It counts for a 95% portion of global Islamic financial assets if sukuk assets are merged with Islamic banking assets. Asia Bond Monitor of Asian Development Bank tells its average growth rate is 27.8%, (Mohammed, 2015)
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