The Role of Political Risk and Financial Development Factors on Sukuk Market Development of Gulf Cooperation Council (GCC) Countries
The literature related to the financial management acknowledges the significant role that political risk play to determine the financial market development. Further, financial system development (banking and financial markets) competes to provide long-term financing, and this competition might be positive or negative for each other. The aim of this paper is to propose a conceptual model/framework for investigating the role of political risk and financial market on Sukuk market development in Gulf Cooperation Council (GCC). GCC economies depend heavily on oil revenues which makes them subject to oil prices fluctuations. Therefore, GCC’s governments should diversify their economies by looking for Sukuk as an alternative source of financing, to cover their budget deficit, when the price of oil decreases, and reduce their reliance on oil, because Sukuk has advantages compared to the conventional bond particularly in terms of less information asymmetry. The prior studies have mostly focused on firms' characteristics determinants of Sukuk issuances but gave a little consideration to the role of country' characteristics on Sukuk market development. This paper proposes a framework to explain the political risk and financial markets determinants of Sukuk market development with a focus on the GCC countries that have the largest region in terms of the Islamic financial assets. It is anticipated that the outcome will support policymakers to improve the current state of Sukuk market.
Submission of an article implies that the work described has not been published previously (except in the form of an abstract or as part of a published lecture or academic thesis), that it is not under consideration for publication elsewhere, that its publication is approved by all authors and tacitly or explicitly by the responsible authorities where the work was carried out, and that, if accepted, will not be published elsewhere in the same form, in English or in any other language, without the written consent of the Publisher. The Editors reserve the right to edit or otherwise alter all contributions, but authors will receive proofs for approval before publication.
Copyrights for articles published in MTI journals are retained by the authors, with first publication rights granted to the journal. The journal/publisher is not responsible for subsequent uses of the work. It is the author's responsibility to bring an infringement action if so desired by the author.