The Influence of Corporate Governance, Financial Ratios, and Sukuk Structure on Sukuk Rating

Abstract

The objective of this study was to provide empirical findings whether corporate governance, financial measures, and sukuk structure have a significant influence on sukuk rating. This study finds some interesting results. The board size has a positively significant influence on the corporate governance in relation to sukuk ratings. The study also demonstrated that financial leverage is negatively related to financial measures and sukuk ratings relationship. The study also demonstrated that sukuk ijarah is positively related to sukuk structure and sukuk rating relationship. The empirical findings are based on a sample of 25 Malaysian publicly traded firms rated by Malaysian rating agencies of RAM and MARC equivalent to S&P over the 2008 and 2012 period. The selected sample is representative enough in that rated and non-rated firms share similar characteristics in terms of (i) their stock return distribution, (ii) the profits they generate, and (iii) their industry distribution in similar industrial sectors.

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