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Islamic Revival: The Indian stock market crash, an Islamic perspective

Please refer to this blog post for more information. Sukuk are Islamic investment certificates commonly used in Islamic finance.

Our results show that the stock market is neutral to announcements of conventional bond issues. However the stock market reacts negatively to announcements of sukuk issues.

The last decade witnessed a wide expansion of Islamic finance in Middle Eastern and Southeast Asian countries. Sukuk issues, which are Islamic financial instruments structured to replicate the cash flows of conventional bonds, have notably proliferated, fuelling the debate on the similarity between Islamic and conventional finance.

Using an event study methodology on a sample of Malaysian listed companies, we investigate whether stock market investors react differently to the announcements of sukuk and conventional bond issues. We find how many stock market millionaires the stock market is neutral to announcements of conventional bond issues, but it reacts stock market in islamic perspective to announcements of sukuk issues.

We attribute this finding to the excess demand for Islamic investment certificates and to an adverse selection mechanism that favors sukuk issuance by lower-quality debtor companies. We thank Jean-Gabriel Cousin for his help, and we are grateful to Wafik Grais, Aaron Mehrotra, Rodney Wilson and participants at the AAOIFI -World Bank Conference December and at the MEEA-ASSA Meeting January for valuable comments and suggestions.

Are Muslims allowed to buy and sell shares on the Stock Market?

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Please enable JavaScript to use all the features on this page. Journal of Comparative Economics Volume 41, Issue 3AugustPages Author links open the author workspace. Numbers and letters correspond to the affiliation list. Click to expose these in author workspace Rima Turk-Ariss. Click to expose these in author workspace Laurent Weill. Opens the author workspace Opens the author workspace a. Abstract The last decade witnessed a wide expansion of Islamic finance in Middle Eastern and Southeast Asian countries.

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