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The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia

Purpose – This study aims to analyze the determinants of ratings of corporate bonds and sukuk issued by firms listed on the Indonesia Stock Exchange (IDX) for the 2013–2019 period. Design/methodology/approach – This study uses a quantitative approach by testing hypotheses and using logistic regressi...

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Main Authors: Laila, Nisful, Rusmita, Sylva Alif, Cahyono, Eko Fajar, Wan Ngah, Wan Azman Saini
Format: Article
Language:English
Published: Emerald Publishing Limited 2021
Online Access:http://psasir.upm.edu.my/id/eprint/95614/1/The%20role%20of%20financial%20factors%20and%20non-financial%20factors%20on%20corporate%20bond%20and%20sukuk%20rating%20Indonesia.pdf
http://psasir.upm.edu.my/id/eprint/95614/
https://www.emerald.com/insight/content/doi/10.1108/JIABR-10-2019-0187/full/html
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spelling my.upm.eprints.956142022-08-02T06:45:24Z http://psasir.upm.edu.my/id/eprint/95614/ The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia Laila, Nisful Rusmita, Sylva Alif Cahyono, Eko Fajar Wan Ngah, Wan Azman Saini Purpose – This study aims to analyze the determinants of ratings of corporate bonds and sukuk issued by firms listed on the Indonesia Stock Exchange (IDX) for the 2013–2019 period. Design/methodology/approach – This study uses a quantitative approach by testing hypotheses and using logistic regression. Ordinal logistic endogenous (or dependent) variables (Y) in ordinal logistics use data in the form of levels (ordinal scale). Independent (or exogenous) variables (X), include financial and nonfinancial factors for dependent (or endogenous) variables (Y), namely, of corporate bonds and sukuk ratings. There are two approaches to the study they are Logit and Gompit (Negative Log-Log. The population of the study is Indonesian companies listed on the IDX that issued bonds and sukuk for the 2013–2019 periods. The sampling technique is purposive. In total, 16 corporate companies adhering to the above criteria and issuing bonds and sukuk were chosen. In total, 270 types of bonds and 280 types of sukuk were selected as samples. Findings – The results of the Logit and Gompit regression show that leverage ratio, firm size, security structure and maturity date are important determinants of corporate bond ratings while profitability and liquidity ratios appear to have no influence on the rating. In the case of sukuk, profitability, liquidity and maturity date play important roles in influencing the corporate sukuk rating. However, there is no evidence to suggest that leverage ratio, company size and security structure may affect sukuk ratings. Research limitations/implications – For both sukuk and bond issuers, it is necessary to pay attention to the factors that may affect the ratings. Specifically, Sukuk issuers need to pay attention to the return of asset, current ratio, growth and structure. On the other hand, bond issuers need to consider depth to equity, structure and maturity. As for investors, the findings of this study reveal that both bond and sukuk ratings reflect their performance. Practical implications – This study provides useful information for investors that allows them to assess the risk of sukuk or bonds chosen based on rating and financial performance. Originality/value – The novelty of this study lies in its econometric methodology used to identify factors which influence sukuk and bond ratings. Specifically, this study used two different techniques that allow a robust conclusion to be drawn. Furthermore, this study provides a systematic analysis which allows comparison between factors which affect bond and sukuk ratings in Indonesia. Emerald Publishing Limited 2021 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/95614/1/The%20role%20of%20financial%20factors%20and%20non-financial%20factors%20on%20corporate%20bond%20and%20sukuk%20rating%20Indonesia.pdf Laila, Nisful and Rusmita, Sylva Alif and Cahyono, Eko Fajar and Wan Ngah, Wan Azman Saini (2021) The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia. Journal of Islamic Accounting and Business Research, 12 (8). 1077 - 1104. ISSN 1759-0817; ESSN: 1759-0825 https://www.emerald.com/insight/content/doi/10.1108/JIABR-10-2019-0187/full/html 10.1108/JIABR-10-2019-0187
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description Purpose – This study aims to analyze the determinants of ratings of corporate bonds and sukuk issued by firms listed on the Indonesia Stock Exchange (IDX) for the 2013–2019 period. Design/methodology/approach – This study uses a quantitative approach by testing hypotheses and using logistic regression. Ordinal logistic endogenous (or dependent) variables (Y) in ordinal logistics use data in the form of levels (ordinal scale). Independent (or exogenous) variables (X), include financial and nonfinancial factors for dependent (or endogenous) variables (Y), namely, of corporate bonds and sukuk ratings. There are two approaches to the study they are Logit and Gompit (Negative Log-Log. The population of the study is Indonesian companies listed on the IDX that issued bonds and sukuk for the 2013–2019 periods. The sampling technique is purposive. In total, 16 corporate companies adhering to the above criteria and issuing bonds and sukuk were chosen. In total, 270 types of bonds and 280 types of sukuk were selected as samples. Findings – The results of the Logit and Gompit regression show that leverage ratio, firm size, security structure and maturity date are important determinants of corporate bond ratings while profitability and liquidity ratios appear to have no influence on the rating. In the case of sukuk, profitability, liquidity and maturity date play important roles in influencing the corporate sukuk rating. However, there is no evidence to suggest that leverage ratio, company size and security structure may affect sukuk ratings. Research limitations/implications – For both sukuk and bond issuers, it is necessary to pay attention to the factors that may affect the ratings. Specifically, Sukuk issuers need to pay attention to the return of asset, current ratio, growth and structure. On the other hand, bond issuers need to consider depth to equity, structure and maturity. As for investors, the findings of this study reveal that both bond and sukuk ratings reflect their performance. Practical implications – This study provides useful information for investors that allows them to assess the risk of sukuk or bonds chosen based on rating and financial performance. Originality/value – The novelty of this study lies in its econometric methodology used to identify factors which influence sukuk and bond ratings. Specifically, this study used two different techniques that allow a robust conclusion to be drawn. Furthermore, this study provides a systematic analysis which allows comparison between factors which affect bond and sukuk ratings in Indonesia.
format Article
author Laila, Nisful
Rusmita, Sylva Alif
Cahyono, Eko Fajar
Wan Ngah, Wan Azman Saini
spellingShingle Laila, Nisful
Rusmita, Sylva Alif
Cahyono, Eko Fajar
Wan Ngah, Wan Azman Saini
The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia
author_facet Laila, Nisful
Rusmita, Sylva Alif
Cahyono, Eko Fajar
Wan Ngah, Wan Azman Saini
author_sort Laila, Nisful
title The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia
title_short The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia
title_full The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia
title_fullStr The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia
title_full_unstemmed The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia
title_sort role of financial factors and non-financial factors on corporate bond and sukuk rating indonesia
publisher Emerald Publishing Limited
publishDate 2021
url http://psasir.upm.edu.my/id/eprint/95614/1/The%20role%20of%20financial%20factors%20and%20non-financial%20factors%20on%20corporate%20bond%20and%20sukuk%20rating%20Indonesia.pdf
http://psasir.upm.edu.my/id/eprint/95614/
https://www.emerald.com/insight/content/doi/10.1108/JIABR-10-2019-0187/full/html
_version_ 1740827324661628928
score 13.211869

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