IJHMS 0101221 Sukuk Ijarah vs. Sukuk Musyarakah

International Journal of Humanities and Management Sciences (IJHMS) Volume 1, Issue 1 (2013) ISSN 2320–4044 (Online) Sukuk Ijarah vs. Sukuk Musyarakah: Investigating Post-Crisis Stock Market Reactions Nursilah Ahmad and Syazwani Abd Rahim Abstract— The aim of this study is to investigate whether market reacts asymmetrically to the issuance of selected sukuk structures (ijarah and musyarakah) in Malaysia for the period 2008-2011. The estimation periods in this study are from 2004-2006. Data are collected from the Securities Commission Malaysia (SC) and Bloomberg database. The study employs event study methodology using cumulative average abnormal return (CAAR) on symmetric and asymmetric events based on the reaction of the FTSE Kuala Lumpur Composite Index (FTSEKLCI) to the announcement of sukuk issuance. The results indicate positive, significant and both symmetric and asymmetric market reactions to sukuk issuance. Hence, market reacts positively and asymmetrically to the announcements of ijarah and musyarakah after the recent crisis. The findings would be useful to issuers, investors and decision-makers to ensure the stability of Islamic capital market and sustainable economic growth. Keywords- sukuk, event-study, FTSEKLCI, ijarah, musyarakah asymmetric, The main contribution of the paper is to examine post-crisis stock market reactions to the issuance of ijarah and musyarakah which are the most commonly issued sukuk structure in Malaysia after 2008 financial crisis. The study is motivated by three key factors affecting sukuk market. First, regain market confidence after restructuring of the high profile sukuk in Dubai after 2008. Second, investors are avoiding the riskier markets of United States and Europe. Third, positive economic growth and favourable debt dynamics in the two most important sukuk issuing regions of the GCC countries and the Asian region, including Malaysia, has attracted investors to the Islamic capital market. This paper adds to the literature since empirical work on the information content of ijarah and musyarakah issues is relatively few. The remainder of the paper is organized as follows. Section II discusses the related literature. Section III highlights the research method. Section IV discusses the findings and the final section concludes the paper. symmetric, I. INTRODUCTION II. LITERATURE REVIEW T he recent modernization in Islamic finance has changed the dynamics of the Islamic financial industry. The changes have caused the demand of sukuk to increase in the last few years and gained universal acceptance as an alternative to conventional financial products. It becomes an increasingly important component of the development of the global Islamic capital market. It has developed as one of the most significant mechanisms to raise finance through Islamic guidelines. Islamic financial instruments provide the possibility of increasing the original asset and the value of sukuk themselves will be appealed the conventional investors looking for them. Besides, the original debt in bonds cannot be increased [1]. There has been growing interest in the issuance of sukuk by corporations, sovereigns and multinational corporations where the demand exceeds the supply. The global sukuk market is denominated in international currencies and is estimated to exceed USD50 billion. Sukuk market is experiencing remarkable growth, increasing at an average rate of growth of 40% per annum [2]. A. Definition of Sukuk Sukuk is an Arabic name for financial certificates, which in economic terms are akin to conventional bonds. Unlike conventional bonds, sukuk need to have an underlying tangible asset transaction either in ownership or in a master lease agreement. It represents ownership of underlying assets, usufructs (benefits), services, or investment. The money that a sukuk holder gets represents a share in the profit of the underlying asset. The Securities Commission Malaysia (SC) defines sukuk as a financial document or certificate which represents the value of an asset evidencing an undivided pro rata ownership of an underlying asset. Islamic securities are securities issued pursuant to any Shari’ah principles and concepts approved by the SC’s Shari’ah Advisory Council (SAC) [3]. The approved Shari’ah concepts and principles for the purpose of structuring, documenting and trading of Islamic securities are described below: i. Musyarakah Sukuk (Profit and Loss-Sharing) A partnership arrangement between two parties or more to finance a business venture, where all parties contribute capital either in the form of cash or in kind for the purpose of financing the business venture. Any profit derived from the venture will be distributed based on a pre-agreed profit-sharing ratio, but a loss will be shared on the basis of equity participation. Nursilah Ahmad is a Senior Lecturer and Research Fellow, Islamic Finance and Wealth Management Institute (IFWMI), Universiti Sains Islam Malaysia. The research is funded by Research Grant FRGS/1/2011/SS/USIM/02/2. Email: [email protected] Syazwani Abd Rahim is a Postgraduate Student, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia. 87 International Journal of Humanities and Management Sciences (IJHMS) Volume 1, Issue 1 (2013) ISSN 2320–4044 (Online) ii. Ijarah Sukuk (Leasing) A manfaah (benefit) type of contract, where a lessor (owner) leases out an asset or equipment to its client at an agree rental fee and pre-determined lease period upon the ‘aqad (contract). The ownership of the leased equipment remains in the hands of the lessor. iii. Mudharabah (Profit-sharing) A contract between two parties to finance a business ventured. The parties are a rabb al-mal (investor), who solely provides the capital; and a mudharib (entrepreneur), who solely manages the project. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio. In the event of a business loss, it shall be borne solely by the provider of the capital. iv. Bai’ Bithaman Ajil or BBA (Deferred-payment Sale) A contract that refers to the sale and purchase transaction for the financing of an asset on a deferred and installment basis, with a pre-agree payment period. The sale price will include a profit margin. v. Murabahah (Cost-plus Sale) A contract that refers to the sale and purchase transaction for the financing of an asset, where the cost and profit margin (mark-up) are made known and agreed to by all parties involved. The settlement of the purchase price can be either on a deferred lump-sum basis or an installment basis, which will be specified in the agreement. portfolio that includes both instruments to a pure Eurobond portfolio. They find that the VaR is reduced when sukuk are added to the portfolio of fixed-income securities, demonstrating that these investment certificates create diversification benefits for investors. However, Godlewski, Turk-Ariss and Weill [8] take an opposing view, suggesting that there is no significant market reaction to conventional bond issues, but a significant negative stock market reaction to sukuk issues. The researchers explain the different stock markets reactions to two factors. First, investors expect that an adverse selection mechanism encourages less-healthy companies to prefer sukuk over conventional bond financing. Second, investors may take the view that even if companies issuing sukuk may have been shut out of the conventional bond market, they can still take advantage of excess demand for sukuk from Islamic banks. C. Stock Market Reactions The efficient markets hypothesis (EMH) is the application of rational expectations to the pricing of securities in financial markets. Ibrahim and Minai mentioned that the market reaction is significantly positive during event windows [-3, 0] and [-3, 3] during the announcements of Islamic debt issuance for the period 2000-2006 in Malaysia [4]. The positive reaction is not due to investors’ preference for Islamic compliant activities, but it is due to similar factors found in studies on conventional bonds. Ameer and Othman find significant negative abnormal returns near the announcement days and the responses are asymmetrical to different types of bonds issuance announcements in Malaysia over the period 2001-2007[9]. Modirzadehbami and Mansourfar report a significant negative abnormal return occurs one day before announcement date in a sample of 45 listed companies on Bursa Malaysia involved in issuing of Islamic debts during 2005 to 2008[10]. There is a wealth effect on the announcement of Islamic bond issues for the period 2001 to 2006 in Malaysia. In short, empirical evidence shows that stock market reactions to sukuk issuance are mixed and inconclusive [11]. This paper only focuses on ijarah and musyarakah structure as the highest number of sukuk issuance in Malaysia nowadays. Malaysia is the largest sukuk market in the world by 68.3%, the highest percentage among other countries. B. Theoretical Framework and Literature Review Ibrahim and Minai report capital structure irrelevant theory was first introduced by Modigliani and Miller in 1958. They assume that under perfect market condition, the capital structure of the firm is irrelevant. However, later they propose that with corporate taxes, shareholders wealth would increase with the increase in debt usage due to the interest tax shield benefit of debt [4]. Under imperfect market, models based on the idea of an optimal structure emphasize trade-offs between debt and equity; the corporate tax advantage of debt versus the costs of financial distress. On the other hand, asymmetric information and cash flow effects model assumed that managers have better information than outsiders about the firm’s value. Myers and Majluf [5] develop a model in which external financing has a negative effect on common stock prices. When external funds have risen, managers tend to issue securities in ascending order of risk (or in a ‘pecking order’) to preserve the wealth of shareholders. Summarizing the arguments, the effect of new financing may be positive, neutral or negative, depending on how the implied changes in cash flow interact with the changes in leverage implied by the type of security issued [6]. There are limited studies that examine the wealth effects of sukuk. Cakir and Raei [7] examine the risk-reduction advantages of issuing sovereign sukuk. Using a sample of sovereign sukuk and eurobonds from the same issuer, the authors estimate and compare value-at-risk (VaR) for a D. Sukuk Development in Malaysia Sukuk contribute approximately 90 percent to the Islamic capital market. The Malaysian sukuk market took off in 1990, when the world’s first sukuk was issued by Shell MDS worth RM125 million of al-Bai’ Bithaman Ajil structure and spread out to the world rapidly [12]. However, the market faces liquidity crunch due to global financial crisis and the debate on the compliance of some of the sukuk structures with Shari’ah law. Despite the challenging market environment, Malaysia continues to be the top world issuer [13]. TABLE I shows the percentage of global sukuk new issuance for the second quarter of 2011. Malaysia is the largest sukuk market in the world with 68.3% of global issuance. The second largest sukuk issuance is Qatar with 19.7% and followed by Indonesia, Bahrain, Saudi Arabia and United Arab Emirates (UAE). 88 International Journal of Humanities and Management Sciences (IJHMS) Volume 1, Issue 1 (2013) ISSN 2320–4044 (Online) TABLE I are collected from DataStream. Estimation period for this event study in this research are from 2004-2006. GLOBAL SUKUK NEW ISSUANCE FOR SECOND QUARTER IN 2011 Country Malaysia Bahrain Indonesia Qatar Saudi Arabia UAE Others Total Q2:2011 (USD Billion) 31.50 0.90 1.70 9.10 0.30 0.00 2.60 46.10 Percentage (%) 68.3 2.0 3.7 19.7 0.7 0.0 5.6 100% TABLE III ISSUANCES OF SUKUK IJARAH (2008-2011) Year Source: BNM. `08 `09 `10 `11 TABLE II shows the breakdown of sukuk issuance by country. Malaysia is the highest sukuk issuer for the period 1996 to 2010 and issued none in 1998 due to financial crisis. After the 2008 crisis, three is deterioration of sukuk issuance but recorded 9,863 issuances in 2008 to 22,124 issuances in 2009. BH ID MY SA UAE Others 0 0 0 0 0 275 500 855 729 1,317 828 1,065 700 1,564 700 0 0 0 0 0 0 19.3 62.2 91.8 71.6 22 135 696 1,765 3,081 771 1,090 0 227 1,037 2.451 3,459 3,554 3,220 7,873 10,747 18,411 9,863 22,124 39,813 0 0 0 0 0 0 0 400 26.1 500 818 5,716 1,873 3,110 3,003 0 0 0 0 0 0 0 0 1,165 950 8,755 10,807.5 5,300.2 3,330.6 1,075.4 0 0 0 0 0 0 0 700 129 1,048 2,121 2,073 1,141 1,540 3,612 13 13 16 22 52 65 53 110 15 5 10 5 2,000 1,500 2,391 1,594 348.058 347.053 457.383 225.055 Tenor (years) Min Max 1 1 2 1 20 17 20 18 TABLE III shows the number of ijarah issuances from 44 companies with a total of 198 issuances worth RM182,191 million. The minimum size of ijarah issuance is RM5 million and the maximum size is RM12,500 million. The minimum tenor is 3.6 months issued by BNM Sukuk Bhd in 2011 and the maximum tenor is 27.5 years by the Senai Desaru Express in 2010. The highest number of issuance is 70 which come from 2011. TABLE II `96 `97 `98 `99 `00 `01 `02 `03 `04 `05 `06 `07 `08 `09 `10 SUKUK MUSYARAKAH (2008-2011) No.of No. of Issue Size (RM) Million Com. Issuance Mi Max Std. n Dev. Source: Authors’ calculation. SUKUK ISSUANCE BY COUNTRY (USD MILLION, 1996-2010) Year Total Amout (RM) Millio n 9,885 12,907 10,811 16,797 TABLE IV ISSUANCES OF SUKUK MUSYARAKAH (2008-2011) Year `08 `09 `10 `11 *BH: Bahrain; ID: Indonesia; MY: Malaysia; SA: Saudi Arabia; UAE: United Arab Emirates. USD1 = RM3.05. Source: Standard & Poor’s (2010). Total Amount (RM) Million 21,537 38,338 42,824 79,492 No. of Com. 14 7 10 13 SUKUK IJARAH (2008-2011) No. of Issue Size (RM) Million Issuance Mi Max Std. n Dev. 32 28 68 70 10 5 5 5 7,500 6,000 5,500 12,500 1,519.49 2,068.90 1,214.29 2,647.14 Tenor (years) Mi Max n 4.0 1.0 1.5 0.3 19.0 20.0 27.5 20.0 Source: Authors’ calculation. The data show that the demand for sukuk and its confidence are high. Demand for Malaysian sukuk has been largely driven by infrastructure and utilities, which account for more than half of Islamic debt market. Other significant issuers in the sukuk market include financial services, trading and services, diversified holding and property and real estate companies [13]. TABLE IV shows the total amount of musyarakah issuances from 64 companies with 280 issuances worth RM50,400.28 million. The highest total amount is RM16,797 million in 2011. There are 22 companies issued musyarakah in 2011. The highest number of issuance is 110 which come from 2011. The minimum size of musyarakah issuance is RM5 million and the maximum is RM2,391 million. The minimum tenor from musyarakah issuances is 1 year and the maximum tenor is 20 years. III. RESEARCH METHOD A. Data B. Measuring Returns The study define returns as follows: Return = [P(t)-P(t1)]/P(t-1)], where P is the stock market daily price at closing based on FTSEKLCI. We examine all symmetric and asymmetric events of 3-day, 4-day, 5-day, 11-day, 16-day, 21day, 26-day, 31-day, 41-day, 46-day, 61-day and 91-day event windows and calculate average abnormal daily returns. The efficient market in Malaysia can be examined using different symmetric and asymmetric event windows. In an efficient market, the closing price of stock market fully reflects all available information. The stock prices should approximately follow a random walk, that is, future changes in stock prices should be unpredictable. The cumulative average abnormal returns (CAARs) are calculated by summing daily excess returns over the respective event windows. The announcement date is the issue date of sukuk. Fig. 1 Time line around event study The study employs a standard event study methodology to estimate abnormal returns around the event date for the selected sukuk issues. The sample period (2008−2011) contains 478 events of ijarah and musyarakah issuances. The following data are collected from each company: date of issuance, date of maturity, issuers, issue size in million, and tenor in years. Daily data of closing prices from FTSEKLCI 89 International Journal of Humanities and Management Sciences (IJHMS) Volume 1, Issue 1 (2013) ISSN 2320–4044 (Online) For the purpose of the study, market is hypothesized to react positively to the announcement of sukuk issuance. This is due to firstly, cheaper financing costs since sukuk has higher liquidity due to wider investor base encompassing of both Muslims and conventional investors. Second, there is higher demand for Shari’ah compliant stocks since 85% of total securities listed in Bursa Malaysia are Shari’ah compliant. Third, funds raised from sukuk are used to finance new activities [4]. The performance of stock prices of firms on certain days is measured using Equation (1): Where; ARit  Abnormal returns for firm i at time period t insignificant results. There are 18 events show significant results at 1% level, and three events show significant results at 5% level. TABLE V ABNORMAL RETURNS OF IJARAH SUKUK DURING ANNOUNCEMENT DATES ON FTSE KUALA LUMPUR COMPOSITE INDEX (FTSE KLCI), 2008-2011 No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (1) R it  Actual returns for firm i at time period t R mt  Returns on market portfolio in period t  i  The constant average returns of stock i  i  Beta estimate of stock = Error time  and β are estimated using market model which relates the given sukuk to the return of market portfolio. The returns on the FTSE Kuala Lumpur Composite Index (FTSEKLCI) are used as a proxy of market returns. They are calculated by running regression of sukuk returns against the market returns of FTSEKLCI. After estimating the abnormal returns for each firm, the abnormal return for all of the firms on each day of the event window are then aggregated and averaged as (2); where N is equal to the number of firms in the sample: 1 N AAR t   AR it N t 1 (2) The t-test for AARt is estimated as Equation (3) (3) t-test = CAAR /  (CAAR) where; AARt = Average abnormal return of period t  CAAR 0.0089 0.0215 0.0303 0.0275 0.018 0.0069 0.0107 0.0387 0.0172 0.0132 0.0327 0.0192 0.0261 0.0317 0.0135 0.0234 0.0229 0.0226 0.0149 0.0193 0.0048 0.0237 0.0227 0.0339 t-test 4.500*** 7.602*** 8.881*** 5.379*** 2.657*** 0.781 0.931 3.009*** 7.396*** 5.111*** 9.671*** 6.711*** 6.509*** 7.076*** 2.376** 3.534*** 3.972*** 3.786*** 2.281** 2.623*** 0.506 2.664*** 2.253** 3.317*** z-test 11.4728 13.5278 13.1178 5.3084 1.9804** 0.4446 0.4104 1.1816 16.0749 9.9825 14.4586 11.8427 8.1902 7.9755 2.1135** 2.6991*** 3.4883*** 3.2067*** 1.7654** 1.7970** 0.2682 1.5111* 1.1299 1.6396* The z-test of CAARt of sukuk issuance on FTSEKLCI shows nine events with positive and significant results and 15 events with positive and insignificant results. Both t-test and z-test indicate that there are more significant results for asymmetric event windows compare to symmetric event windows. Asymmetric events show more significant results compare to symmetric events. TABLE VI ABNORMAL RETURNS OF MUSYARAKAH SUKUK DURING ANNOUNCEMENT DATES ON FTSE KUALA LUMPUR COMPOSITE INDEX To observe the cumulative effects, the cumulative abnormal returns (CAARt,+t2) are computed as Equation (4) below: t 2 (4)  CAAR AAR (FTSE KLCI), 2008-2011.  Note: *, ** and *** denote significance at 10%, 5% and 1% levels. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24  t1 CAARt is a more precise representative of the longer term effect on share prices from bond offering announcements. The z-test for the CAARt is given as Equation (5): (CAAR) (5) z-test = CAAR /  Events [-1,+1] [-2,+2] [-5,+5] [-10,+10] [-15,+15] [-20,+20] [-30,+30] [-45,+45] [-1,+2] [-2,+1] [-2,+5] [-5,+2] [-5,+10] [-10,+5] [-5,+20] [-20,+5] [-10,+15] [-15,+10] [-10,+20] [-20,+10] [-15,+30] [-30,+15] [-15,+45] [-45,+15] Note: *, ** and *** denote significance at 10%, 5% and 1% levels. Source: Authors’ calculations. = Standard deviation of average abnormal return over the estimation window   t 1,  t 2  Days 3-day 5-day 11-day 21-day 31-day 41-day 61-day 91-day 4-day 4-day 8-day 8-day 16-day 16-day 26-day 26-day 26-day 26-day 31-day 31-day 46-day 46-day 61-day 61-day 2 The standard deviation of CAAR is defined as Equation (6); where N is the number of days in the CAAR statistics: (6)  ( CAAR )   ( AAR ) N T-test and z-test are parametric tests. They refer to statistical tests in which assumptions are made about the underlying distribution of the observed data. Parametric tests are more robust and for the most part require less data to make a stronger conclusion than nonparametric tests. V. RESULTS TABLE V shows abnormal returns of ijarah during Days 3-day 5-day 11-day 21-day 31-day 41-day 61-day 91-day 4-day 4-day 8-day 8-day 16-day 16-day 26-day 26-day 26-day 26-day 31-day 31-day 46-day 46-day 61-day 61-day Events [-1,+1] [-2,+2] [-5,+5] [-10,+10] [-15,+15] [-20,+20] [-30,+30] [-45,+45] [-1,+2] [-2,+1] [-2,+5] [-5,+2] [-5,+10] [-10,+5] [-5,+20] [-20,+5] [-10,+15] [-15,+10] [-10,+20] [-20,+10] [-15,+30] [-30,+15] [-15,+45] [-45,+15] CAAR 0.0058 0.0074 0.0055 0.0057 0.0181 0.0351 0.0448 0.0544 0.0062 0.0071 0.0068 0.006 0.0066 0.0044 0.0174 0.0231 0.01 0.0138 0.0164 0.0244 0.0379 0.025 0.0394 0.0323 t-test 3.808*** 3.945*** 1.403 1.067 3.254*** 5.425*** 5.046*** 4.240*** 3.424*** 4.478*** 2.453** 2.123** 1.385 1.019 3.525*** 3.965*** 2.010** 2.310** 3.135*** 3.607*** 5.548*** 3.184*** 4.182*** 3.527*** z-test 8.84 7.51 1.29* 0.72 2.08** 3.00*** 2.03** 1.18 6.76 10.17 3.16*** 2.69*** 1.03 0.83 2.54*** 2.43*** 1.44* 1.38* 2.14** 1.90** 2.90*** 1.45* 1.58* 1.38* Source: Authors’ calculations. announcement dates on FTSE Kuala Lumpur Composite Index, 2008-2011. This table indicates that positive results on cumulative average abnormal return in all event windows. These results are tested using equations (3) and (5). A total of 21 event windows show positive and significant results based on the results of t-test and only three events show positive and TABLE VI shows the results of CAARt for each event window using FTSEKLCI for musyarakah issuances in Malaysia. The results indicate that positive results on cumulative average abnormal return in all event windows. A total of 20 event windows show positive and significant 90 International Journal of Humanities and Management Sciences (IJHMS) Volume 1, Issue 1 (2013) ISSN 2320–4044 (Online) there are confidence effects that shareholders wealth will be increased through the issuance of ijarah and musyarakah sukuk. Thus, the results approve our hypothesis of positive market reaction on FTSEKLCI index after ijarah and musyarakah issuance in Malaysia. Future research might want to distinguish the reaction of stock markets on the issuance of other sukuk structures, for example distinguishing between asset-based and asset-backed sukuk. In addition, macroeconomic factors that move sukuk markets can also be incorporated in the estimations of CAARt to get a more accurate and robust values of beta in the future. results based on t-test results and only four events show positive and insignificant results. Meanwhile, the z-tests of conducted on musyarakah show 16 events with positive and significant results and eight events with positive and insignificant results. Asymmetric events show more significant results compare to symmetric events. Regardless of the positive reactions, possible reason for early response could be the fact that information of Islamic bond offering often leaks out to the market before the announcements [10]. Although the number of companies and issuances by musyarakah more than ijarah, the total amount of ijarah are higher than musyarakah along the years after the 2008 crisis. However, they have recovered after crisis. Then, 21 event windows for ijarah and 20 event windows for musyarakah show positive and significant results after testing by t-test. Nine events for ijarah and 16 events for musyarakah show positive and significant results after testing by z-test. The statistical data show that Ijarah is better than musyarakah. In 2008, ijarah was the most favorable structure of sukuk in terms of dollar amount and number of issues [14]. There were 53 ijarah issued amounting to USD7.2billion, or 47.6% of total amount issued. A total of 32 number of issuance out of these 53 sukuk issuance (60.3%) were sukuk corporate. Ijarah is gaining popularity in the industry because the structure proved to be profitable while being compliant by Shari’ah. Thus, the results indicate positive market reactions on both ijarah and musyarakah announcement after 2008 financial crisis in Malaysia. However, not all events show positive and significant results which can be attributed to two reasons. First, there is leakage of information to the market before ijarah and musyarakah announcements. Second, there is increase awareness among investors regarding sukuk having common features with equity instead of conventional bond. These results also suggest that stock market will react positive and significant on the longer event period which many days after sukuk announcements. This is because sukuk investors and conventional investors show their awareness to the information of ijarah and musyarakah announcements. Islamic bond carries specific features that differentiate it from conventional bonds and have approved by Shari’ah Advisory Council (SAC) of the Securities Commission Malaysia. Sukuk does not pay interest, but generate returns through commoditization of capital gain. It cannot be classified exclusively in debt category because it also shares some stock features. These are considering the similar characteristics of sukuk and equity [10]. In short, financial markets in emerging economies are not expected to be as efficient as those in more advanced economies, so there could be a leakage of information when new ijarah and musyarakah are issued. As such, it is possible that abnormal returns are realized prior to the announcement date. However, the increasing trend of CAARt is a good early indication that the recent ijarah and musyarakah announcement is perceived to be non-negative by investors after the 2008 financial crisis. REFERENCES [1]Mohamed, Z. Senior Associate, Azmi & Associates. Article: ‘Sukuk-A Brief Introduction’, 2008. [2]Mohamad, N.E.A., & Mohd Saad, N. ‘Sukuk in Malaysian Capital Market’. 3rd International Conference On Business And Economic Research (3rd ICBER 2012) proceeding 12 - 13 MARCH 2012. Golden Flower Hotel, Bandung, Indonesia, 2012. [3]Malaysian Debt Securities and Sukuk Market,‘A Guide for Issuer and Investor’, A joint Publication by Central Bank of Malaysia and Securities Commission Malaysia 2009. [4]Ibrahim, Y. & Minai, M.S. Islamic Bonds and the Wealth Effects: Evidence from Malaysia. Investment Management and Financial Innovations, Vol. 6, Issue 1, 2009. [5]Myers, S. & Majluf, N. “Corporate Financing And Investment Decisions When Firms Have Information That Investors Do Not Have”, Journal of Financial Economics, Vol. 13, 1984. [6]Smith Jr, C.W. ‘Investment banking and the capital acquisition process’. Journal of Financial Economics 15, pp. 3 – 29, 1986. [7]Cakir, S., & Raei, F. “Sukuk vs. Eurobonds: Is There a Difference in Value-at-Risk?” International Monetary Fund Working Paper, 2007. [8]Godlewski, C. J.,Turk-Ariss, R. and Weill, L.“Do markets perceive sukuk and conventional bonds as different financing instruments?” Bank of Finland (BOFIT) Discussion Papers 6, 2011. [9]Ameer, R. & Othman, R.‘Stock Market Reaction to Bonds Issuance: Evidence from Malaysian Banking Sector’. International Research Journal of Finance and Economics ISSN 1450-2887. Issue 45, 2010. [10]Modirzadehbami, S. & Mansourfar, G. ‘Information Content of Islamic Private Debt Announcement: Evidence from Malaysia’. World Academy of Science, Engineering and Technology, 2011. [11]Ashhari, Z. M., Chun, L. S., & Nassir, A. M. Conventional vs Islamic Bond Announcements: The Effects on Shareholders’ Wealth. International Journal of Business and Management, Vol. 4. Issue 6, 2009. [12]Haider, J. & Azhar, M. ‘Islamic Capital Market: Sukuk and its Risk Management in the Current Scenario’. Umea School of Business & Economics, Umea University, Sweden, 2010. [13]International Islamic Finance Hub. ‘Gateway to Asia: Malaysia’. Supported by: Malaysia International Financial Centre (MIFC), 2010. [14]MENA Sukuk Report. Global Investment House. Global Research Sukuk, ‘Sukuk Market-Down but Not Out’, February 2009. IV. CONCLUSION The positive market reactions can be interpreted in two ways. First, market can readily distinguish the news. Second, 91