Asymmetric information and securitization design in Islamic capital markets

Halim, Zairihan Abdul; How, Janice C. Y.; Verhoeven, Peter; Hassan, M. Kabir

doi:10.1016/j.pacfin.2019.101189

Cited by 10 publications

(8 citation statements)

References 27 publications

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“…This information may be manipulated to increase the issuer's benefits by inflating the initial price of ṣukūk or attracting more investors. According to Abdul Halim et al (2020a), corporate ṣukūk are subject to asymmetric information risk, similar to other conventional debts in the capital market.…”

Section: Full Disclosure To Support ṣUkūk Stakeholders' Needsmentioning

confidence: 99%

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Lemhishi,

Ghaith Mahaini

2024

IJIF

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Purpose — This study aims to assess the first ṣukūk issuance in Libya from two main perspectives: the compliance of the ṣukūk with the Sharīʿah and its compliance with the Libyan legal system. Further, the study evaluates the adequacy of the provided financial disclosures to assess the feasibility of the ṣukūk issuance. Design/Methodology/Approach — A qualitative case study methodology was used to assess the ṣukūk issuance in question. For the assessment of disclosure adequacy, a tailored model was devised featuring main and subsidiary points of interest. Findings — The Sharīʿah assessment findings suggest potential non-compliance issues within the ṣukūk issuance. Additionally, there are significant gaps in the disclosure of key financial aspects related to both the ṣukūk originator and the project, potentially hindering stakeholders from gaining a comprehensive understanding of the issuance’s feasibility. Originality/Value — One unique advantage of this paper is that it is the first to gain access to the actual documentation of ṣukūk issuances in Libya. Research Limitations/Implications — The study’s scope was constrained by a scarcity of data and documents from Libyan parties. Practical Implications — After analysing the ṣukūk issuance, a framework of Sharīʿah and financial disclosures was developed. The application of the proposed framework can be extended to effectively assess other comparable ṣukūk offerings within the Libyan legal system. Social Implications — Libyan policymakers are recommended to strengthen the regulations governing forthcoming ṣukūk issuances. The proposed improvements should include mandating comprehensive disclosures regarding the financial viability of the ṣukūk issuance and ensuring ample disclosures to guarantee full adherence to Sharīʿah principles.

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Section: Full Disclosure To Support ṣUkūk Stakeholders' Needsmentioning

confidence: 99%

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Lemhishi,

Ghaith Mahaini

2024

IJIF

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“…Given the conflict of interests that may arise among investors, trustees and other entities within ABS, stakeholders ought to take practical steps in order to maximize asset recovery and value [79]. This may be why original equity holder credit (OEHC) impacts the success of ABS since ABS depends, at least partly, on recovered asset value [80,81]. Additionally, investors should pay attention to the security structure, as a rational security design can help improve credit standing [64,71,81].…”

Section: Literature Reviewmentioning

confidence: 99%

“…This may be why original equity holder credit (OEHC) impacts the success of ABS since ABS depends, at least partly, on recovered asset value [80,81]. Additionally, investors should pay attention to the security structure, as a rational security design can help improve credit standing [64,71,81]. At the macro level, the asset securitization market in China is policy driven and regulation-segmented [82].…”

Section: Literature Reviewmentioning

confidence: 99%

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Determining Critical Success Factors for Public–Private Partnership Asset-Backed Securitization: A Structural Equation Modeling Approach

et al. 2021

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Public–private partnership (PPP) has been widely applied in China and many developing countries in the recent decade. As new PPP projects gradually enter the operational phase, the issue of refinancing becomes increasingly important. PPP–ABS plays an indispensable role in PPP project refinancing. The factors that promote the success of the emerging PPP–ABS in the China financial market need to be determined. To accomplish two objectives, namely, to identify critical success factors (CSFs) and to explore the relationship between these factors and the success of the PPP asset-backed securitization (PPP–ABS) of this research, methods such as a questionnaire survey and structural equation modeling (SEM) were conducted successively. Four success factors, including underlying asset quality (UAQ), original equity holder credit (OEHC), rationality of security design (RoSD) and maturity of relative institutions (MoRI), were identified in this study. Consequently, nineteen theoretical hypotheses were developed and tested. It is shown in the SEM approach that UAQ and OEHC positively influence the success of PPP–ABS, alongside issuance characteristics (IC) that mediate the relationship between the success of PPP–ABS and UAQ, RoSD and MoRI, respectively. This finding increased knowledge of PPP–ABS and how investors and government can benefit from it.

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“…The existence of information will have its own costs, so there will be efforts by each party involved in the business to hide information (Thadden, 2004). Some parties may get more information than others and this is called asymmetric information (Abdul et al, 2020;Xue & Zhang, 2019). Basically, information asymmetry occurs if the company has more information about the product than the buyer, although the opposite condition may also occur.…”

Section: Introductionmentioning

confidence: 99%

Overcoming Asymmetric Information with a Profit sharing System at Islamic Bank: Acceleration of Theory and Practice

Yasin,

Kabul,

Herman

et al. 2023

JEFMS

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This study aims to examine the profit-sharing system in Islamic banks in overcoming the adverse selection issue and the practice of implementing the profit-sharing system. In this study, evaluative and descriptive methods were used. The results of this study indicate that theoretically the issue of asymmetric information can be overcome by a profit-sharing system in Islamic banks. In practice, the profit-sharing system has been implemented at Bank NTB Syariah as a superior product in productive financing. The market share of the profit-sharing system at Bank NTB Syariah was at 64.73 percent in 2019 and increased to 68.55 percent in 2020 with a growth of 35.78 percent. The Covid-19 pandemic does not significantly affect the health condition of Bank NTB Syariah where Bank NTB Syariah remains relatively healthy before and after the Covid-19 pandemic.

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Asymmetric information and securitization design in Islamic capital markets

Cited by 10 publications

References 27 publications

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Determining Critical Success Factors for Public–Private Partnership Asset-Backed Securitization: A Structural Equation Modeling Approach

Overcoming Asymmetric Information with a Profit sharing System at Islamic Bank: Acceleration of Theory and Practice

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