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All Journal Journal of Islamic Monetary Economics and Finance
M. Kabir Hassan
University of New Orleans, USA
Economics, Econometrics & Finance

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SOVEREIGN DEBT ISSUANCE CHOICE: SUKUK VS CONVENTIONAL BONDS Rhada Boujlil; M. Kabir Hassan; Rihab Grassa
Journal of Islamic Monetary Economics and Finance Vol 6 No 2 (2020)
Publisher : Bank Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21098/jimf.v6i2.1104

Abstract

This paper investigates the determinants and their factors that affect governments’ decision to employ sovereign Sukuk over conventional bonds; the research is based on a sample of 143 Sukuk and 602 conventional sovereign bonds issued in 16 OIC countries from 2000 to 2015. The results depict that more nations that have developed financial markets, higher credit quality, and strong economic/financial prospects, issue sovereign Sukuk rather than sovereign conventional bonds. Dealing with Sukuk bonds can be a strategy to diversify and develop current debt markets by introducing newly-developed debt tools. However, less economically developed nations countries are typically issuing insurance for classic sovereign bonds. Our findings suggest that a government’s choice of sovereign debt is influenced mainly from national financial and macroeconomic indicators, as well as specific events. Countries with developed financial markets, strong economic indicators, high credit quality, and sustainable financial position are more likely to issue sovereign Sukuk rather than sovereign bonds as a strategy to develop and diversify their financial markets by promoting new debt products.
ESG ACTIVITIES AND BANK EFFICIENCY: ARE ISLAMIC BANKS BETTER? Ahmed W. Alam; Hasanul Banna; M. Kabir Hassan
Journal of Islamic Monetary Economics and Finance Vol 8 No 1 (2022)
Publisher : Bank Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.21098/jimf.v8i1.1428

Abstract

In this paper, we investigate the differential impact of ESG activities on banks’ technical efficiency for conventional and Islamic banks. We employ a Data Envelopment Analysis (DEA) technique to determine the efficiency scores of the banks. Based on a sample of 14 conventional and 11 Islamic banks from 4 countries over the period 2011 - 2019, we find that average DEA-generated efficiency of conventional (Islamic) banks is about 38.8% (42.45%). Baseline Tobit regressions suggest that ESG has an overall positive impact on banks’ efficiency. Further, we analyze the relationship for conventional and Islamic banks separately. We find that the positive effect sustains for conventional banks but turns out to be insignificant for Islamic banks. Our individual ESG dimension-wise analyses suggest that environmental activities positively influence the efficiency of both conventional and Islamic banks, whereas social activities strengthen the efficiency of conventional banks only. We do not find any significant result in favor of governance-related initiatives. Our baseline results survive the robustness test based on Simar and Wilson (2007) two-stage efficiency analysis. Based on our findings, we argue that Islamic banks lack sufficient investment on ESG friendly initiatives. We recommend that Islamic banks increase their awareness of the benefits of ESG practices and pay attention to improve their overall and dimension-wise ESG scores with a goal to improve their banking efficiency.
Co-Authors Ahmed W. Alam Hasanul Banna Rhada Boujlil Rihab Grassa