Determinants of Corporate Leverage in Publicly Listed GCC Companies – Conventional versus Sukuk

Abstract

I study the determinants of conventional leverage in a sample of publicly listed corporations based in Saudi Arabia, United Arab Emirates, and Qatar, for a period spanning from 2005 up to end of 2014, and investigate whether those determinants can also explain the utilization of Sukuk by the same corporations in their capital structures. Evidence related to the determinants of conventional leverage is consistent with results from prior studies conducted on corporations based in developed and developing countries. Firm’s size, profitability, tangibility, age, and tendency to pay dividends are significant determinants of conventional leverage. However, not all those factors significantly explain the utilization of Sukuk as a financing vehicle. The size of the firm remains to be the most significant factor, in addition to the conformance of those corporations with respect to Shari’a principles measured by their utilization of other Islamic investments and financing instruments. Overall, I conclude that models used to predict conventional leverage are not capable of fully explaining the determinants of Sukuk issuances.

Citation

El-Khatib, R. (2017), "Determinants of Corporate Leverage in Publicly Listed GCC Companies – Conventional versus Sukuk", Global Corporate Governance (Advances in Financial Economics, Vol. 19), Emerald Publishing Limited, Leeds, pp. 77-102. https://doi.org/10.1108/S1569-373220160000019004