Corporations Choice for Issuing Sukuks Over Conventional Loans: “A Case of Pakistani Corporate Sector”
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Author:
S. HASSAN JAMIL
Citable URI :
https://vspace.vu.edu.pk/detail.aspx?id=84
Publisher :
Virtual University of Pakistan
Date Issued:
2/9/2017 12:00:00 AM
Abstract
The securitization of sukuk (Islamic bond) has attract different researcher to understand its nature. This study was undertaken to identify the determinants of sukuks for the firm who intend to issue this security for the very first time in Pakistan. It is important to understand that why would firm issue sukuks over the choice of conventional bank borrowings which has long been used in the Pakistani financial market. The predictors undertaken for this study are, firm internal funds ability the return on investment, capital investment in tangible assets, firm size, conventional bank borrowing to total liabilities, market to book ratio, and leverage. The study introduced a new determinant in the case, the interest coverage ratio as proxy of financial distress for the firm decision for issuing sukuks. Census data of 13 firms were observed which remained listed on KSE from 2005 till 2015 that include the period before Sukuk were floated in Pakistan’s financial markets. The study employed Panel Least Square Models; OLS, White Cross-Section covariance and Coefficient, Model, FE Model and RE Model. Both the likelihood ratio and Hausman test has favored FE model as consistent and efficient model. The study revealed empirically that firm prefers its internally generated funds as first choice of financing as per pecking order theory, the firms makes mutually exclusive choice among conventional bank borrowing and sukuk financings, and it prefers sukuk financing when they are dealing under financial distress. The study also found that sukuk being asset based financing scheme is preferred when firms are growing their fixed assets over already available capital and reserves.
URI :
https://vspace.vu.edu.pk/details.aspx?id=84
Citation:
Jamil, S. H. (2017). Corporations Choice for Issuing Sukuks Over Conventional Loans: A Case of Pakistani Corporate Sector. Virtual University of Pakistan, (Lahore, Pakistan).
Version :
Final Version
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All the material and results are copyright of Virtual University of Pakistan
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