Yield Spread Determinants of Sukuk and Conventional Bonds

Saeed, Momna and Elnahass, Marwa and Izzeldin, Marwan and Tsionas, Mike (2021) Yield Spread Determinants of Sukuk and Conventional Bonds. Economic Modelling, 105. ISSN 0264-9993

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Abstract

Despite increased economic turmoil over the past few years, the Islamic financial sector including sukuk has shown tremendous growth and stability. This study examines the yield spread determinants of sukuk and conventional bonds. We comparatively assess the effects of firm- and industry-specific variables, bond characteristics, and macroeconomic conditions on the yield. Our sample data features bonds and sukuk of different maturities issued by 58 publicly traded (listed) firms in Malaysia. For sukuk, primary determinants are the firm-specific indicators which indicate lower yield spreads. Moreover, sukuk spreads do not widen with equity volatility, making them less risky than conventional bonds. For conventional bonds, both firm-level and bond-specific characteristics significantly affect yield spreads. Higher financial leverage with shorter maturity is associated with low yields and low spreads. Findings in this study present new insights and important policy implications for investors trading in and regulators governing sukuk and conventional bonds.

Item Type:
Journal Article
Journal or Publication Title:
Economic Modelling
Additional Information:
This is the author’s version of a work that was accepted for publication in Economic Modelling. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economic Modelling, 105, 2021 DOI: 10.1016/j.econmod.2021.105664
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
161017
Deposited By:
Deposited On:
14 Oct 2021 12:55
Refereed?:
Yes
Published?:
Published
Last Modified:
15 Oct 2021 04:25