Islamic Bonds Research Articles

Sukuk (an Islamic Bond) Utilization for One Belt One Road

Sukuk (an Islamic Bond) Utilization for One Belt One Road

Dynamic relation between global Islamic and conventional sectoral stock and bonds indexes

This paper examines the relationship between 10 Global sectoral conventional and Islamic assets. For each sector, a conventional, an Islamic stock index and a bond are retained. The analyzed relations are done by taking into account diverse investment horizons by using MODWT and GARCH-DCC-type models. Our results indicate that adding bond indexes into a portfolio composed with conventional stock or Islamic stock is efficient. As for the correlations between conventional and Islamic sectoral indexes, they depend on the sector. Relations between returns of securities are quite similar to the relations between high-frequency part of these series and are very volatile at low frequency.

The Influence of Macroeconomics Indicators to The Growth of Sukuk in Indonesia

<p><em>The purpose of this study is to analyze the influence of macroeconomic on the growth of Islamic bonds (sukuk) in Indonesia period 2013.1-2016.12. This study uses Ordinary Least Square (OLS) method with a monthly time series starting from January 2013 until December 2016. The results of this study indicate that the Production Index (IP) and Bank Indonesia Syariah Certificate (BSBIS) variables positively and significantly affect the development of state sukuk issuance in Indonesia, then inflation negatively and significantly affects the development of state sukuk issuance, while the JII variable negatively and does not significantly affect the development of state sukuk issuance in Indonesia.</em></p>

Les Sukuk souverains : une réelle alternative pour le financement des infrastructures en Afrique subsaharienne ?

Le marché des obligations islamiques a déjà prouvé son intérêt comme une source de financement viable pour les secteurs privé et public. Il connaît depuis dix ans une très forte croissance, aussi bien dans le monde musulman qu'ailleurs. Les obligations islamiques sont des instruments flexibles qui peuvent être une réelle alternative au financement des projets d'infrastructure du continent africain. Récemment, plusieurs pays du continent ont adopté ce type d'instruments et d'autres ont annoncé leur volonté d'en émettre. Cependant, plusieurs défis restent à surmonter pour que l'émission de Sukuk en Afrique subsaharienne devienne une alternative viable. Cet article présente les progrès réalisés en termes d'émissions de Sukuk . Il présente également les avantages d'un tel instrument pour le financement des projets d'infrastructure et les défis, juridiques et techniques, qui restent à surmonter en Afrique. Classification JEL : G23, G28, O16, 055.

Do Sukuk provide diversification benefits to conventional bond investors? Evidence from Turkey

We investigate the contribution of Sukuk in diversification of bond portfolios. We do so by comparing Turkish bond funds that invest exclusively in conventional bonds (pure conventional bond funds), in Sukuk (pure Islamic bond funds), and in both (mixed bond funds) among each other for the period of 2014–2019. We employ tests of differences in means and variances of various risk-return measures as well as mean-variance spanning and intersection tests in order to uncover the diversification potentials of Sukuk in the portfolio management industry. Our results suggest that bond funds, of which the portfolios are composed of a combination of Sukuk and conventional bonds (i.e. mixed bond funds), have a relatively “lower risk-higher return” profile. Moreover, including Sukuk to conventional bond portfolios theoretically offers significant diversification opportunities for investors, particularly when the economy worsens.

Earnings management around Islamic bonds issuance

We examine whether the religious values underlying Islamic bonds influence issuers’ financial reporting behavior. Using a sample of 1316 sukuk tranches issued by publicly listed firms in Malaysia from 2001 to 2014, we find sukuk issuers overstate their earnings in the year preceding sukuk offerings, and in the year subsequent to the offering. We also examine the influence of religious values associated with the parties involved in sukuk issuance on issuers’ earnings management. Our results show that a Muslim-dominated board is associated with less earnings management, supporting the idea of Islamic business ethics.

IMPACT OF ISLAMIC FINANCE ON ECONOMIC GROWTH: AN EMPIRICAL ANALYSIS OF MUSLIM COUNTRIES

Islamic finance is one of the most rapidly growing sectors of the global financial system. This paper empirically outlines the pure effect of Islamic finance including Islamic banking and Islamic bonds on economic growth in major Muslim countries. Current study has taken up Islamic banks’ assets and Islamic banks’ financing, total value of sukuk issued and real GDP as measuring proxies. For the analysis, PMG of ARDL framework has been utilized. The outcomes of the study revealed that in the long run, Islamic banks’ assets, Islamic banks’ financing and Islamic bonds are significantly correlated with real GDP in Muslim countries.

OBSTACLES AND STRATEGY OF MUNICIPAL ISLAMIC BONDS ISSUANCE AS AN ALTERNATIVE OF MUNICIPAL FUNDING

<p class="Default"><em>The objective of this thesis is to identify obstacles and strategies for municipal Islamic bond issuance as an alternative in regional financing using the Analytical Networking Process (ANP). The analysis found that the most dominant obstacle in the aforementioned issue is the local government aspect. In the aspect of the central government, the obstacle is the unavailability of studies concerning the instrument of municipal Islamic bonds. In the aspect of the local government, the obstacle is the low understanding of the government about the means of municipal Islamic bonds. In the aspect of the regional house of representative, the obstacle is the behaviour of representatives, in which they complicate bureaucracy in the issuance of municipal Islamic bonds. The most dominant solution for the obstacles and strategy in the issuance of municipal Islamic bonds is a fundamental solution. The dominant strategy for a fundamental solution is the socialization of education about municipal Islamic bonds and a promotion pattern in collaboration with Indonesia’s financial service authority.</em></p><strong><em>Keywords</em></strong><em>: municipal Islamic bonds, obstacle, strategy</em>

Economic uncertainties, macroeconomic announcements and sukuk spreads

ABSTRACT With the large expansion of Islamic finance in the recent years, sukuks (Islamic bonds), which are the Shariah-compliant substitute to conventional bonds, are now becoming more prominent. Although there are numerous studies that have looked at the impact of global shocks on conventional bond spreads, little attention has been paid to explore the effect of the global shocks to the sukuk spreads. This study’s objective was thus to examine the impact of factors affecting the conventional bond and sukuk markets, including financial factors, economic policy uncertainty, U.S. and EU macroeconomic news, using an ordinary least squares approach. The results indicated that for regions and countries such as the GCC (Gulf Cooperation Council), Malaysia, Indonesia, Turkey, and Singapore, global shocks play a vital role in explaining sukuk spreads. Furthermore, employing a matched sample featuring firms from these regions and countries revealed that European and U.S. macroeconomic announcements and economic policy uncertainty have a significantly greater impact on sukuk spreads than on conventional bond spreads.

CEO Power, Corporate Governance, Auditors’ Reputation, and its Effects on Corporate Islamic Bonds Rating

CEO Power, Corporate Governance, Auditors’ Reputation, and its Effects on Corporate Islamic Bonds Rating

The role of related party transactions on sukuk financing

PurposeThe Islamic bond, known as sukuk, is an ethical financing avenue driven by religious and profit motives. This study aims to analyze the relation between related party transactions and Sukuk. Companies with high related parties transactions are deemed to be committed toward social capital that they are more likely to choose sukuk for their debt financing.Design/methodology/approachLogistic regression analyses were conducted using data from 122 listed companies in Malaysia. Related party transactions proxy for companies’ commitment to social capital, while the likelihood to choose sukuk represents ethical financing.FindingsThis study documents a positive relationship between related party borrowings and sukuk, suggesting that close ties through related parties have created an ethical sense that is associated with the uptake of sukuk.Research limitations/implicationsFuture research can opt other measures of related party transactions, such as by identifying the different categories of transactions and related parties. Future research may also extend the sample size by using samples from several countries to enable analysis involving institutional environment variables of the countries.Practical implicationsFindings of this study highlight sukuk uniqueness by supporting its role as ethical financing avenue through commitment toward social capital.Originality/valueThis study is the first to use the social capital perspective of related party transactions in identifying ethical financing choice that the authors believe is relevant in the institutional context of developing Muslim countries.

Probability Approach in Estimating Value at Risk of Bond Portfolios for Effective Hedging

Bond portfolios are growing as the investors like banks, fund managers and institutional investors are more interested in Malaysian Bond market comprises conventional and Islamic (Sukuk) Bonds. The Malaysian Sukuk market has provided greater diversification especially catering to the needs of investors such as Islamic pension funds and Islamic insurance companies which can only invest in Shariah-compliant instruments. As the Sukuk and conventional bonds complement each other in Malaysia, we have chosen from real portfolios framed by popular mutual funds to study the risk management practices adopted by these portfolios and to observe the differences and the reasons for them. The link between duration and price volatility is widely used for managing risk positions and portfolio value protection due to the market volatility which can cause huge losses on large exposures. We have applied standard risk measures of bond portfolios, portfolio duration and portfolio convexity to assess the Value at Risk (VaR) accurately and this will lead to minimum cost of hedging. Fair value hedging requires accurate expected loss, which is arrived at by applying these estimates of duration and convexity. We used Bond funds which invest more than 74% of funds in Islamic Bond or Conventional Bond which are designed and implemented by popular Banks and Mutual funds. These results helped in computing the VaR which subsequently could be hedged with the available financial instruments such as interest rate futures in Bursa derivative market effectively.

Herding behaviour and Islamic market efficiency assessment: case of Dow Jones and Sukuk market

PurposeThe purpose of this paper is to present the Islamic stock and Sukuk market efficiency and focus on the presence of investor herding behaviour (HB) captured by Hurst exponent estimation.Design/methodology/approachThe Hurst exponent was estimated with various methods. The authors studied the evolving efficiency of the “Dow Jones” indices from 1 January 2010 to 30 December 2016 using a rolling sample of the Hurst exponent. In addition, they used a time-varying parameter method based on the Hurst of delayed returns. After that, the robust Hurst method was considered. In the next step, the efficiency of the different activity types of Islamic bonds was studied using an efficiency index. Finally, the Hurst exponent estimates were applied to assess the presence of HB.FindingsThe results show that, firstly, there’s a strong correlation between the “DJIM” and “DJSI” prices and returns. Secondly, by using robust Hurst estimate, it is observed that the “DJIM” is the most efficient market. The Hurst exponent estimation results show that HB is more intensive in the Islamic stock market. These results indicate also the inexistence of this behaviour in the studied Sukuk market.Research limitations/implicationsSukuk as Islamic financial assets is recent. Their relative time series are not long enough to apply the long memory approach. Furthermore, this work can be extended to study other Islamic financial markets.Practical implicationsHerding affects risk-return characteristics of assets and has an impact on asset pricing models. Practitioners are interested in understanding herding and its timing as it might create profitable trading opportunities.Social implicationsThis work analyses the impact of Islamic principles on the financial markets and their ability to understand some behavioural biases.Originality/valueThis study contributes to the literature by identifying the efficiency and the presence of HB with Hurst exponent estimation in Islamic markets.

Pengetahuan tentang Sukuk Tidak Mempengaruhi Masyarakat untuk Berinvestasi Sukuk

<p>This study aims to find the relationship between the knowledge of society about islamic bonds (sukuk) with the interest of public investment to islamic bonds (sukuk). The research method used is descriptive correlation with cross sectional time approach done in Sleman regency. Sampling technique in this study using non probability sampling with consecutive sampling method. The number of samples is 90 respondents with data collection using questionnaires. Data were analyzed using chi-square. The result of research shows that there is no relationship between the knowledge of islamic bonds (sukuk) and the public interest to invest in islamic bonds (sukuk). Knowledge only has an effect of 14.3%.</p>

PENGARUH PENERBITAN SUKUK TERHADAP REAKSI PASAR (SURVEY TERHADAP PERUSAHAAN-PERUSAHAAN YANG MENERBITKAN OBLIGASI SYARIAH YANG TERDAFTAR DIBURSA EFEK INDONESIA SELAMA TAHUN 2015)

This study aims to determine how the influence of a sukuk instrument issuance on market reactions listed on the Indonesia Stock Exchange (IDX) during 2015. The research method used in this study is quantitative research. Quantitative research contains a relationship between cause and effect. The type of data used is secondary data, data collection used by the author is to know the relationship between two or more variables. The object to be examined in this study is the total value and rating of the issuance of Islamic bonds (sukuk) companies as independent variables and cumulative abnormal return shares of companies that issue Islamic bonds (sukuk) listed on the Indonesia Stock Exchange in 2015. The results of this study indicate the value of sukuk bond issuance and sukuk bond issuance ratings jointly affect stock returns. The value of issuing sukuk bonds partially affects stock returns and the rating of bond issuance has an effect on return.

Waqf Development in Marawi City via Issuance of Perpetual Waqf Sukuk

Since 2017, the city of Marawi was left in ruins after five months of aerial bombardments and close-quarter fighting between Islamic State of Iraq and al-Sham (ISIS) and government forces. Many buildings were destroyed; mosques and schools are no exceptions. While rebuilding efforts have begun in the city, the government has limited resources to fund city reconstruction and Waqf properties (e.g. mosques and schools) are not constitutionally considered as part of the government assets. Fortunately, the government seeks to channel funding for city reconstruction, including Islamic finance schemes. Therefore, this paper aims to assess the opportunities and challenges to rebuild Waqf properties through the issuance of Sukuk, Islamic bond. This paper adopts a qualitative research approach where secondary sources such as books, journals, articles and websites related to Waqf are reviewed. The paper also examines the successful examples of Sukuk-Waqf as part of the analysis.

WITHDRAWN: Are Islamic bond (sukuk) issuing firms less risky than conventional bond issuing firms?

WITHDRAWN: Are Islamic bond (sukuk) issuing firms less risky than conventional bond issuing firms?

An Investigation of the Relationship between Sukuk and the Performance of banks of Pakistan

Using panel data analysis, this study investigates the relationship among Islamic bonds (Sukuk) and the performance of IB’s of Pakistan for the period of 2008-2017. The study has used two stages approach. At the first stage, the profitability and liquidity of banks have been measured by calculating financial ratios. These ratios were than further used in regression analysis to examine whether a relationship exists between Sukuk and the bank’s profitability and liquidity. Our study found a significant positive relationship among Sukuk and the liquidity of IB’s. While, the results show significant but negative relationship between Sukuk and profitability of IB’s. Based on the findings of the study, we concluded that Sukuk has an important role in enhancing the liquidity of IB’s but it has adverse impact on the profitability of IB’s of Pakistan. Thus, the emergence of Sukuk market may pose threats to the profitability of the IB’s of Pakistan.

An investigation of the relationship between sukuk and the performance of banks of Pakistan

Using panel data analysis, this study investigates the relationship among Islamic bonds (Sukuk) and the performance of IB’s of Pakistan for the period of 2008-2017. The study has used two stages approach. At the first stage, the profitability and liquidity of banks have been measured by calculating financial ratios. These ratios were than further used in regression analysis to examine whether a relationship exists between Sukuk and the bank’s profitability and liquidity. Our study found a significant positive relationship among Sukuk and the liquidity of IB’s. While, the results show significant but negative relationship between Sukuk and profitability of IB’s. Based on the findings of the study, we concluded that Sukuk has an important role in enhancing the liquidity of IB’s but it has adverse impact on the profitability of IB’s of Pakistan. Thus, the emergence of Sukuk market may pose threats to the profitability of the IB’s of Pakistan.

Are sukuk debt or equity? A classification of sukuk by regulatory bodies and credit rating agencies

Sukuk (Islamic bonds) are the Shariah (Islamic law) instrument that serves as an alternative to conventional bonds that are used in the modern capital market. In theory, sukuk represent a form of equity as they represent certificates conferring ownership to holders of an asset or pool of assets or claim to its cash flows. In practice, they have become known as Islamic bonds with their investors holding debt. Following the question of whether sukuk are debt or equity, this paper aims to classify sukuk from the perspective of regulatory bodies and credit rating agencies. Furthermore, to what extent the innovations in this Islamic instrument make it differ substantially from conventional bonds in practice will be examined.