The Impact of Sukuk Issuance on Stock Prices: New Insights from the Jakarta Stock Exchange
DOI:
https://doi.org/10.21009/ISC-BEAM.013.123Keywords:
Sukuk, Islamic Bonds, Indonesia, Islamic Finance, Economic Development, Systematic Literature ReviewAbstract
Abstract
This study fills a critical gap in the Islamic finance literature in emerging markets by examining the market reaction to Sukuk issuances of firms listed on the Jakarta Stock Exchange (JKSE) between January 2023 and October 2024. Drawing on signaling theory, it is hypothesized that Sukuk issuances can signal positive firm performance and financial health, thereby influencing investor behavior. A market-adjusted event study methodology is employed, where abnormal returns (AR) and cumulative abnormal returns (CAR) are calculated over an event window of -10 to +10 days, where statistical significance is tested through t-values and p-values. Our results reveal heterogeneous responses across firms. Some firms show statistically significant positive ARs after issuance, while others show neutral or negative responses. The variation in CARs suggests that Sukuk issuances are perceived differently depending on firm-specific factors and broader market conditions. These findings contribute to the Islamic finance literature by providing empirical evidence on the financial market impacts of Sukuk, especially in Indonesia, where Islamic finance is growing rapidly. The research highlights the role of Sukuk as a financing tool in enhancing market perceptions and investor confidence, offering practical implications for both policy makers and corporate managers.
References
AAOIFI, Publication No:10/2015. Interest-Free Finance Standards, p.l.: TKBB Publications.
Abdullah, M., & Sofian, S. (2012). The Role of Financial Ratios in Signaling Sukuk Rating. International Journal of Economics and Finance, 4(1), 165-175. https://doi.org/10.5539/ijef.v4n1p165
Alam, A., Ratnasari R. T., Jannah I. L. & Ashfahany A. E. (2023). Development and Evaluation of Islamic Green Financing: A systematic Review of Green Sukuk. Environmental Economics, 14(1), 61-72.
Aman, A., Naim, A. M., Isa, M. Y., & Ali, S. E. A. (2022). Factors Affecting Sukuk Market Development: Empirical Evidence from Sukuk Issuing Economies. International Journal of Islamic and Middle Eastern Finance and Management, 15(5), 884-902.
Ballı, F., Ghassan, H., & Al Jeefri, E. H. (2021). Sukuk and bond spreads. Journal of Economics and Finance, 45, 529–543.
Ballı, F., Billah, M., Ozer Ballı, H., & Bruin D. A. (2022). Spillovers Between Sukuks and Shariah-Compliant Equity Markets. Pacific-Basin Finance Journal. 72.
Billah, M., Amar, A. B., & Ballı, F. (2023). The Extreme Return Connectedness Between Sukuk and Green Bonds and their Determinants and Consequences for Investors. Pacific-Basin Finance Journal, 77.
COMCEC Coordination Office. (2018, February). Retrieved November 2024 from The Role of Sukuk in Islamic Capital Markets: https://www.sbb.gov.tr/wp-content/uploads/2019/08/%C4%B0sedak-%C4%B0slami-Sermaye-Piyasalar%C4%B1nda-Sukukun-Rol%C3%BC.pdf
Cummings, J. R., & Dakin, J. (2017). Market Reaction to Sukuk Issuances: Evidence from the Gulf Cooperation Council. Emerging Markets Review, 31, 37-49. https://doi.org/10.1016/j.ememar.2017.01.004
Delle Foglie, A., & Keshminder, J. S. (2024). Challenges and Opportunities of SRI Sukuk Toward Financial System Sustainability: A Bibliometric and Systematic Literature Review. International Journal of Emerging Markets, 19(10), 3202-3225.
Dilber, C. (2022). The Relationship between Sukuk and Economic Growth: An Application on Türkiye. ÇAKÜ Social Sciences Institute Journal, 343-364.
Echchabi, A., Abd Aziz, H., & Idris, U. (2018). The impact of Sukuk financing on economic growth: the case of GCC countries . Int. J. Financial Services Management, 60-69.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383-417. https://doi.org/10.2307/2325486
IIFM Sukuk Report 2023, International İslamic Financial Market, 1-202.
Jobst, A., Kunzel, P., Mills, P., & Sy, A. (2008). Islamic Bonds: The Prospect of Economic Stability through Sukuk. Journal of Financial Stability, 4(3), 203-216.
Ledhem, M. A. (2020). Does Sukuk Financing Boost Economic Growth? Empirical Evidence from Southeast Asia. PSU Research Review, 6(3), 141-157.
MacKinlay, A. C. (1997). Event Studies in Economics and Finance. Journal of Economic Literature, 35(1), 13-39. https://www.jstor.org/stable/2729691
Miller, M. H., & Rock, K. (1985). Dividend Policy under Asymmetric Information. Journal of Finance, 40(4), 1031-1051. https://doi.org/10.1111/j.1540-6261.1985.tb02362.x
Naeem, M. A., Rabbani, M. R., Karim, S., & Billah, S. M. (2023). Religion vs ethics: hedge and safe haven properties of Sukuk and green bonds for stock markets pre- and during COVID-19. International Journal of Islamic and Middle Eastern Finance and Management, 16(2), 234-252
Trabelsi, N., Umar, Z., Dogah, K.E., & Vo, X. V. (2024). Are Investment Grade Sukuks Decoupled from the Conventional Yield Curve? International Review of Financial Analysis. 91.
Spence, M. (1973). Job Market Signaling. Quarterly Journal of Economics, 87(3), 355-374. https://doi.org/10.2307/1882010
Yıldırım S., Yıldırım D. C., & Dipoglu P. (2020). Does Sukuk Market Development Promote Economic Growth? PSU Research Review, 4(3), 209-218.
Yuliani, I., Qizam, I., Nugroho, A., & Mu'arrif, Z. I. (2022). The impact of Sukuk on the country’s economic growth with country governance as a moderating variable. Al-Uqud: Journal of Islamic Economics, 112–123.
Yüce, A., & Toor, U. (2023). Motivation of Firms to Issue Sukuks. International Journal of Islamic Banking and Finance Research, 11(1), 1-8.
