Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 30174
Information content of Islamic Private Debt Announcement: Evidence from Malaysia

Authors: Sahar Modirzadehbami, Gholamreza Mansourfar

Abstract:

Different types of Islamic debts have been increasingly utilized as preferred means of debt funding by Malaysian private firms in recent years. This study examines the impact of Islamic debts announcement on private firms- stock returns. Our sample includes forty five listed companies on Bursa Malaysia involved in issuing of Islamic debts during 2005 to 2008. The abnormal returns and cumulative average abnormal returns are calculated and tested using standard event study methodology. The results show that a significant, negative abnormal return occurs one day before announcement date. This negative abnormal return is representing market participant-s adverse attitude toward Islamic private debt announcement during the research period.

Keywords: Announcement effect, Event study, Islamic debts, Malaysia, Sukuk

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1081233

Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 1613

References:


[1] I. Muhammad bin, and W. Adrian, "The corporate bond market in Malaysia Developing corporate bond markets in Asia." Bank Negara Malaysia, 2006.
[2] Bank Negara Malaysia and Securities Commission Malaysia," Malaysian Debt Securities and Sukuk Market."2009
[3] F. Modigliani, and M.H. Miller, "The Cost of Capital, Corporation Finance and The Theory of Investment." American Economic Review, vol. XLVIII(3), pp. 261-297, 1958.
[4] S.C. Myers, and N.S. Majluf, "Corporate financing and investment decisions when firms have information that investors do not have." Journal of Financial Economics, vol. 13, pp. 187-221, 1984.
[5] A. Abhayankar, and A. Dunning, "Wealth effects of convertible bond and convertible preference share issues: An empirical analysis of the UK market." Journal of Banking & Finance, vol. 23 ,pp. 1043-1065, 1999.
[6] M.T. Bradshaw, S.A. Richardson, and R.G. Sloan, "The relation between corporate financing activities, analysts' forecasts and stock returns." Journal of Accounting and Economics,vol 42, pp. 53-85, 2006.
[7] D. Magennis, E. Watts, and S. Wright, " Convertible notes: the debt versus equity classification problem." Journal of Multinational Financial Management, vol.8, pp.303-315,1998.
[8] W.H. Mikkelson, and M.M. Partch, "Valuation effects of security offerings and the issuance process." Journal of Financial Economics, vol. 15, pp. 31-60, 1986.
[9] C.R. Harvey , K.V. Lins, and A.H. Roper, "The effect of capital structure when expected agency costs are extreme." Journal of Financial Economics, vol.74, pp. 3-30, 2004
[10] J.K. Kang, and R.M. Stulz, "How different is Japanese corporate finance? an investigation of the information content of new security issues." The Review of Financial Studies, vol. 9, pp. 109-139, 1996.
[11] De. F. Roon, and C. Veld, "Announcement effects of convertible bond loans and warrant-bond loans: An empirical analysis for the Dutch market." Journal of Banking & Finance, vol. 22, pp. 1481-1506, 1998
[12] B. Arshanapalli, F. Fabozzi, L. N. Switzer, and G. Gosselin, "New evidence on the market impact of Convertible Bond Issues in U.S." Paper presented at annual meeting of the California,Oct 2004.
[13] W. Cheng, N. Visaltanachoti, and P. Kesayan," A Stock Market Reaction Following Convertible Bond Issuance: Evidence from Japan."International Journal of Business,10(4), 2005
[14] M. Ammann, M. Fehr, and R. Seiz, " New evidence on the announcement effect of convertible and exchangeable bonds." Journal of Multinational Financial Management , vol. 16,pp. 43-63,2006.
[15] L.Y. Dann, and W.H. Mikkelson, "Convertible debt issuance, capital structure change and financing-related information - Some new evidence." Journal of Financial Economics, vol. 13, pp. 157-186, 1984
[16] P. Stephen, and J. David, "Stock price effect of high yield debt issues." The Review of Financial Studies, vol. 71, pp. 393-410, 1990.
[17] D.H. Shawn, E.H. Shelly, and B.H. Steven, "The market reaction to straight debt issues: the effect of free cash flow." The Journal of Financial Research, vol. XXI, pp. 219-228, 1998.
[18] B.E. Eckbo, "Valuation effects of corporate debt offerings." Journal of Financial Economics, vol.15, pp.119-151, 1986.
[19] Z.M. Ashhari, " Conventional vs Islamic Bond Announcements: The Effects on Shareholders- Wealth." International Journal of Business and Management, vol 4,pp. 6,2009
[20] S.J Brown, and J.B. Warner, "Using daily stock returns: the case of event studies." Journal of Financial Economics, vol. 14, pp. 3-31, 1985.
[21] C. Uday, and N. Nandkumar, "The Information Content of Private Debt Placements." Journal of Business Finance & Accounting, vol. 35, pp. 1164-1195, 2008.
[22] A.C. MacKinlay, "Event Studies in Economics and Finance. Journal of Economic Literature," vol. 35, pp. 13-39, 1997.
[23] M.N. Annuar, and M. Shamsher, "Capital structure." Capital Market Review, vol. 2,pp. 171-177, 1993.
[24] M.a. Shamsher, and H. Taufiq, "Political Events and Share Prices of Politically-Connected Firms." Working Paper, 2009.