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Societal trust and Sukuk activity

Author

Listed:
  • Saqib Aziz

    (ESC [Rennes] - ESC Rennes School of Business)

  • Dawood Ashraf
  • Rwan El-Khatib

    (Zayed University)

Abstract

Sukuk investments require investors and issuers to adhere to subtle moral and ethical standards beyond following mere profit maximization objectives. Investor trust manifested through the level of societal trust could be vital in the global Sukuk investment surge. This study investigates the relationship between the societal trust level and Sukuk activity. It employs a global sample of Sukuk issuances spanning over 2001–2019 and finds that a country's societal trust level significantly and positively influences the amount of Sukuk issued. Moreover, this positive effect supersedes the negative effects of higher information asymmetry associated with equity-based Sukuk or Sukuk issued by risky firms. Ultimately, trust is both a deterrent and critical for Islamic finance success.

Suggested Citation

  • Saqib Aziz & Dawood Ashraf & Rwan El-Khatib, 2021. "Societal trust and Sukuk activity," Post-Print hal-03330282, HAL.
    • Handle: RePEc:hal:journl:hal-03330282
    DOI: 10.1016/j.intfin.2021.101384
    Note: View the original document on HAL open archive server: https://rennes-sb.hal.science/hal-03330282
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    Cited by:

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    2. Gao, Ning & Jiang, Wei & Jin, Jiaxu, 2024. "Unravelling investors’ diverging responses to U.S. firms' global ESG incidents," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    Trust; Sukuk; Islamic finance; Information asymmetry; Culture;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Z19 - Other Special Topics - - Cultural Economics - - - Other

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