The trade-off theory assumes that there are benefits to leverage up until the optimal capital structure is reached. However, the fact yet remains puzzled whether sukuk companies possess the same trade-off effect because sukuk holds both debt and equity characteristics. The topic is prominent because of the increasing interest of sukuk issuance in the capital market, and series of financial distress occurrence especially among the debt issuers. The aims of the study are twofold, first is to identify whether sukuk issuance companies survive longer than bonds issuance companies, and second is to identify factors that contribute to the survival time. Samples of the study were consisting of all financially distressed sukuk and bonds issuance companies in Malaysia. The Cox regression model was conducted to develop the model. The result reveals a similar length of survival time for both sukuk and bonds companies. However, the results show that the liquidity ratio, measured by operating cash flow to current liability (OCFCL), is the most significant predictor in the case of sukuk. Contrary to expectations, none of the predictors tested are significant for bond companies. These results suggest a new theoretical understanding that even though the survival time between sukuk and bonds companies is similar, there is a unique factor in determining the survival time for sukuk companies. Future research may explore further on the importance of liquidity on asset-backed securities versus asset-based securities.