Staff View: Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia

Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia

The presence of key institutional investors/owners and BOD characteristics as highlighted by Malaysian Code on Corporate Governance (MCCG) may have influence on the yield to maturity (YTM) of bonds and sukuk. It is argued that higher institutional ownerships will produce enhanced active monitoring o...

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Main Authors:	Saad N.M., Haniff M.N., Ali N.
Other Authors:	56070007300
Format:	Article
Published:	Serials Publications 2023
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id	my.uniten.dspace-22940
record_format	dspace
spelling	my.uniten.dspace-229402023-05-29T14:13:33Z Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia Saad N.M. Haniff M.N. Ali N. 56070007300 36491433500 35224598000 The presence of key institutional investors/owners and BOD characteristics as highlighted by Malaysian Code on Corporate Governance (MCCG) may have influence on the yield to maturity (YTM) of bonds and sukuk. It is argued that higher institutional ownerships will produce enhanced active monitoring on cost of debt and presumably more control on the likelihood of default risk occurrence as measured by the size of yield spreads for conventional bonds and sukuk. Agency theory also explains the relationship between principal and agent and the possible misalignment of interest of both parties is reflected through the incurrence of what is termed as agency cost. To reduce this agency cost requires the necessity of incurrence of cost of monitoring and controlling by the principal which in large firms is represented by institutional investors which delegated this responsibility to the appointed board of directors (BOD). Thus, the main objective of this study is to investigate the relationship between these corporate governance mechanisms with respect to institutional investors and BOD characteristics with the default risk as proxy by yield spread of bond and sukuk in Malaysia. The data are obtained from firm issuers' annual reports, Bondinfo Hub of Malaysian Central Bank, Malaysian Department of Statistics and Bloomberg databases for the period beginning 2000 to 2014. Unbalanced panel data are applied for the tests which cover the pooled ordinary least square (OLS), fixed effects (FE) and random effects (RE) models. The results suggest that the presence of institutional ownerships does have an inverse relationship on the default risk for long-term sukuk. However, the results do not support any relationship between institutional ownerships and long-term conventional bonds defaults. Mixed result reveal by BOD characteristics. Final 2023-05-29T06:13:33Z 2023-05-29T06:13:33Z 2016 Article 2-s2.0-84989907979 https://www.scopus.com/inward/record.uri?eid=2-s2.0-84989907979&partnerID=40&md5=78035ab085ca68dcd3d12d86c2b4f1bc https://irepository.uniten.edu.my/handle/123456789/22940 14 6 3709 3723 Serials Publications Scopus
institution	Universiti Tenaga Nasional
building	UNITEN Library
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	Universiti Tenaga Nasional
content_source	UNITEN Institutional Repository
url_provider	http://dspace.uniten.edu.my/
description	The presence of key institutional investors/owners and BOD characteristics as highlighted by Malaysian Code on Corporate Governance (MCCG) may have influence on the yield to maturity (YTM) of bonds and sukuk. It is argued that higher institutional ownerships will produce enhanced active monitoring on cost of debt and presumably more control on the likelihood of default risk occurrence as measured by the size of yield spreads for conventional bonds and sukuk. Agency theory also explains the relationship between principal and agent and the possible misalignment of interest of both parties is reflected through the incurrence of what is termed as agency cost. To reduce this agency cost requires the necessity of incurrence of cost of monitoring and controlling by the principal which in large firms is represented by institutional investors which delegated this responsibility to the appointed board of directors (BOD). Thus, the main objective of this study is to investigate the relationship between these corporate governance mechanisms with respect to institutional investors and BOD characteristics with the default risk as proxy by yield spread of bond and sukuk in Malaysia. The data are obtained from firm issuers' annual reports, Bondinfo Hub of Malaysian Central Bank, Malaysian Department of Statistics and Bloomberg databases for the period beginning 2000 to 2014. Unbalanced panel data are applied for the tests which cover the pooled ordinary least square (OLS), fixed effects (FE) and random effects (RE) models. The results suggest that the presence of institutional ownerships does have an inverse relationship on the default risk for long-term sukuk. However, the results do not support any relationship between institutional ownerships and long-term conventional bonds defaults. Mixed result reveal by BOD characteristics.
author2	56070007300
author_facet	56070007300 Saad N.M. Haniff M.N. Ali N.
format	Article
author	Saad N.M. Haniff M.N. Ali N.
spellingShingle	Saad N.M. Haniff M.N. Ali N. Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia
author_sort	Saad N.M.
title	Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia
title_short	Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia
title_full	Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia
title_fullStr	Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia
title_full_unstemmed	Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia
title_sort	corporate governance and default risk in long-term conventional bonds and sukuk in malaysia
publisher	Serials Publications
publishDate	2023
_version_	1806428289873477632
score	13.222552

Corporate governance and default risk in long-term conventional bonds and sukuk in Malaysia

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