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Which firms do prefer Islamic debt? An analysis and evidence from global sukuk and bonds issuing firms

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  • Uddin, Md Hamid
  • Kabir, Sarkar Humayun
  • Hossain, Mohammed Sawkat
  • Wahab, Nor Shaipah Abdul
  • Liu, Jia

Abstract

The Islamic debt instrument sukuk has been in the market for two decades; still, we do not know why a firm prefers an Islamic debt over conventional debt, set aside religiosity issue. We argue there is a genuine reason to choose Islamic debt because it has lighter indebtedness, benefits of avoiding external monitoring, and tax incentives. Based on the cross-country data for 346 firms issuing dollar-denominated global sukuk and bonds, we find that firms that prefer Islamic debt and issue sukuk are financially more unstable, and thus exposing to higher insolvency risk as compared to bond issuing firms.

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  • Uddin, Md Hamid & Kabir, Sarkar Humayun & Hossain, Mohammed Sawkat & Wahab, Nor Shaipah Abdul & Liu, Jia, 2020. "Which firms do prefer Islamic debt? An analysis and evidence from global sukuk and bonds issuing firms," Emerging Markets Review, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:ememar:v:44:y:2020:i:c:s1566014119305254
    DOI: 10.1016/j.ememar.2020.100712
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    4. Awais Ur Rehman & Saqib Farid & Muhammad Abubakr Naeem, 2022. "The link between corporate governance, corporate social sustainability and credit risk of Islamic bonds," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 18(12), pages 5990-6014, May.

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