Noriza Mohd Saad

Firm's Growth and Sustainability: The Role of Institutional Investors in Mitigating the Default Risks of Sukuk and Conventional Bonds☆

Abstract This study investigates the relationship of conventional bonds and sukuk’ yields spread to institutional investors using multivariate regression model. Secondary data was used for issuance (N= 212 of conventional bonds and 325 of sukuk) cover the 2000-2014 periods which are gathered from Bank Negara Info Bond Hub website. Though, data on issuer performance has been obtained from Bloomberg and Thompson Data Stream. The results revealed that monitoring role and voting rights decisions by owned large ownership of shareholding in the company have a relationship towards sukuk issuances in mitigating the default risks but not for conventional bonds. Overall, there are 6 variables statistically significant relationship with yields spread for conventional bonds compared to only 4 for sukuk. Implying that, sukuk issuance doesn’t have any significant relationship with the elements that involved “riba” for instance, volatility effects and inflation rate proxy by consumer price index (CPI) as recorded by conventional bonds. However, both types of issuances give a good signal for the firms sustainability growth performance at 99 percent significant level to mitigate the default risks with respect to yield spreads of sukuk and conventional bonds.