A qualitative analysis on the determinants of legitimacy of sukuk

• Published in: Journal of Islamic accounting and business research 2019-05, Vol.10 (3), p.342-368
• Main Authors: Ahmed, Essia Ries, Islam, Md Aminul, Alabdullah, Tariq Tawfeeq Yousif, Amran, Azlan Bin
• Format: Article
• Language: English
• Subjects: Auditing; Benchmarks; Compliance; Documentation; Financial institutions; Financial instruments; Investors; Islamic financing; Islamic law; Legitimacy; Liquidity; Principles; Researchers; Scholars; Studies
• ISSN: 1759-0817; 1759-0825; 1759-0817
• DOI: 10.1108/JIABR-01-2016-0005

Purpose This paper aims to investigate the influence of the determinants (pricing, type of structure, Shariah auditing, Shariah risk and Shariah documentation) and the sukuk legitimacy among Islamic financial institutions using a qualitative approach. The paper further explained the significance of the determinants on legitimacy, evaluated the relationship between sukuk characteristics and sukuk legitimacy and examined the moderating effect of Shariah Supervisory Board (SSB) on the relationship. Design/methodology/approach The study used a purposive sampling technique to select the target respondents required for the survey (semi-structured interview). This technique is applied by selecting members of SSBs among Islamic financial institutions. A total number of ten members are selected as the sample size for the study based on their experience and basic knowledge of Fiqh Al-Mua’malat and its application in Islamic financial institutions. Findings The findings revealed that the determinants have a significant impact on the sukuk legitimacy, meaning that there is a positive and significant relationship between the determinants and the sukuk legitimacy. In addition, this study indicates the empirical evidence of the moderating effect of SSB on the relationship between the determinants and the sukuk legitimacy. Practical implications This study has added to the literature by examining the determinants of sukuk legitimacy while evaluating the moderating effect of SSB on the relationship. Besides, this might add benefits to the numerous Islamic financial institutions relating to the amendment of its regulatory frameworks with the view to pushing the sukuk market investors to move toward asset-backed structure. In addition, the SSB in central banks must also focus its attention regarding the sukuk legitimacy and its application among the various Islamic financial institutions. Originality/value This study has added a new discussion to the body of knowledge, i.e. examining the sukuk legitimacy and its relationship with sukuk determinants; hence, an approach that is not widely discussed in the previous studies. Furthermore, conducting such research in the field of Islamic finance provides novelty in the literature among both emerging and developed economies including Malaysia. This is because to the best knowledge of the researchers, there was no empirical study (within the literature) that combined these variables and evaluated their empirical significance. Accord