Agency costs and corporate sukuk issuance

Halim, Zairihan Abdul, How, Janice, & Verhoeven, Peter (2016) Agency costs and corporate sukuk issuance. Pacific-Basin Finance Journal. (In Press)

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Abstract

Once a niche financial instrument, sukuk have become a mainstream alternative source of capital for corporations. This paper examines the motivations for firms to finance their investment opportunities using sukuk rather than conventional bonds, and their choice of sukuk structure. We test the agency implications of sukuk design for a sample of 230 corporate bonds issued in Malaysia from 2001 to 2014. Our results are consistent with the agency cost mitigation of free cash flow and underinvestment providing a core rationale for firms’ adoption of such a complex asset-based financing. Our results are robust to sample selection bias, a wide array of controls, and alternative specifications.

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ID Code: 95982
Item Type: Journal Article
Refereed: Yes
Keywords: Sukuk, Asset-based finance, Securitisation, Extensive contracting, Agency costs, Financing structure choice
DOI: 10.1016/j.pacfin.2016.05.014
ISSN: 0927-538X
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2016 Elsevier B.V.
Deposited On: 07 Jun 2016 23:21
Last Modified: 10 Jun 2016 11:39

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