Are Islamic bonds different from conventional bonds? International evidence from capital market tests

Alam, Nafis; Hassan, M. Kabir; Haque, Mohammad Aminul

doi:10.1016/j.bir.2013.10.006

Cited by 112 publications

(94 citation statements)

References 15 publications

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“…() each analyzes and discusses the reasons for and the backdrop of Sukuk market development, but they do not conduct micro‐level empirical analyses. To the best of our knowledge, only Afshar (), Godlewski et al (), Alam et al () and Hassan () empirically studied the Sukuk market. Godlewski et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Who drives whom ‐ sukuk or bond? A new evidence from granger causality and wavelet approach

et al. 2018

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Sukuk is a highly appealing alternative instrument of conventional bond in the financial market over the last two decades. To a certain extent, the market players assume sukuk as the same as bond. However, sukuk has its own fundamental asset backed principles, whereas bond is backed by debt. The objective of the study is to examine the Granger‐causality and lead–lag relationship between sukuk and bond by using the data of the Malaysian Government securities return for both conventional and Islamic instruments. The data for every working day of 7 years covering the period from January 31, 2007 to December 31, 2013 were collected from Bloomberg database. The yield returns of both securities have been plotted for each six months of a year. This study applied both Granger‐causality and dynamic co‐movement techniques such as, continuous wavelet transforms (CWT) coherence for analyzing the temporal evolution of the frequency content of both securities by decomposing each period into different time scales. The empirical findings of the paper reveal that with a bit of exception, there is a causal relationship between sukuk securities and conventional bonds for a given period of time. For robustness, this study applied the wavelet coherence approach and found that bond is led by sukuk in the long term investment horizon rather than in the short term. Our findings relating to the lead‐lag relationship between sukuk and bonds have important implications in terms of policy regulations and investment management. Future research and market practices could reinvestigate the differences between these two securities across different markets and types.

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Section: Literature Reviewmentioning

confidence: 99%

Who drives whom ‐ sukuk or bond? A new evidence from granger causality and wavelet approach

et al. 2018

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“…() and Alam et al . () use event study approaches to examine investor reaction to Sukuk issuance – they both find evidence of negative market reaction suggesting that investors do not view such activities in a positive light. Finally, Bialkowski et al .…”

Section: Islamic Financementioning

confidence: 99%

Islamic Banking and Finance: Recent Empirical Literature and Directions for Future Research

Abedifar

Ebrahim

Molyneux

et al. 2015

Journal of Economic Surveys

167

102

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This paper examines the recent empirical literature in Islamic banking and finance, highlights the main findings and provides a guide for future research. Early studies focus on the efficiency, production technology and general performance features of Islamic versus conventional banks, whereas more recent work looks at profit‐sharing and loss‐bearing behaviour, competition, risks as well as other dimensions such as small business lending and financial inclusion. Apart from key exceptions, the empirical literature suggests no major differences between Islamic and conventional banks in terms of their efficiency, competition and risk features (although small Islamic banks are found to be less risky than their conventional counterparts). There is some evidence that Islamic finance aids inclusion and financial sector development. Results from the empirical finance literature, dominated by studies that focus on the risk/return features of mutual funds, finds that Islamic funds perform as well, if not better, than conventional funds – there is little evidence that they perform worse than standard industry benchmarks.

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“…Other papers noticed a varied reaction in the capitalisation of Malaysian listed companies to information on the issuance of conventional bonds and sukuk. However, in one instance the investors' reaction to sukuk issues was negative (Godlewski et al, 2010;Alam et al, 2013), while other results indicated that investors reacted positively to the announcement of Islamic debt issues (Ibrahim and Minai, 2009). In turn, a study analysing the effectiveness of portfolios composed of Eurobonds and sukuk of the same issuers based in Malaysia, Pakistan, Qatar and Bahrain detected material differences in the behaviour of the two instruments (Cakir and Raei, 2007).…”

Section: The Nature Of Sukuk -Theoretical and Empirical Approachmentioning

confidence: 95%

“…They consider not only the direct issuance costs, which are usually higher than in the case of conventional bonds, but also barriers to demand resulting from a small investor base, and the distinctness and considerable complexity of the construction of those Islamic instruments. One of the factors which should also be borne in mind is the potential negative effect of the announcement of a sukuk issuance on company value (Alam, Hassan, and Haque, 2013).…”

Section: Barriers and Challenges For The Participants Of The Europeanmentioning

confidence: 99%

Challenges and Barriers to the Development of Sukuk in the European Capital Market

Piotrowski¹

2017

Proceedings of the 8th Economics &Amp; Finance Conference, London

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Are Islamic bonds different from conventional bonds? International evidence from capital market tests

Cited by 112 publications

References 15 publications

Who drives whom ‐ sukuk or bond? A new evidence from granger causality and wavelet approach

Who drives whom ‐ sukuk or bond? A new evidence from granger causality and wavelet approach

Islamic Banking and Finance: Recent Empirical Literature and Directions for Future Research

Challenges and Barriers to the Development of Sukuk in the European Capital Market

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