Determinants of Mispricing on Indonesian Sovereign Sukuk Auction

DOI

10.2991/icied-17.2018.30How to use a DOI?

Keywords

sukuk, auction, underpricing, overpricing

Abstract

Common Value Theory points out the situation in financial instrument auction where investors tend to bid a lower price than the actual value and it results in an underpricing of financial instrument. The underpricing, further, may hamper the market as it leads to revenue loss for the company. As the Islamic financial market developed, government of Indonesia expands their instrument variations and started to issue Islamic Bond (sukuk) in 2008. There is still lack of empirical literature relating to sukuk pricing performance although sukuk has several distinct features such as the existence of underlying asset. This paper attempts to examine the underpricing indication in sukuk issuance during 2012-2016 and analyze the factors that might explain its persistence. To examine the existence of sukuk underpricing issuance, this study uses yield spread from weighted average yield when auction and market yield when auction. To this end, Ordinary Least Square model is applied to analyze the determinants of underpricing. In contrast to the theory, the result shows that average sukuk issuance in Indonesia indicates a higher market yield than weighted average yield when auction

Copyright

© 2018, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Ristiyanti Hayu Pertiwi
AU  - Tika Arundina
PY  - 2017/12
DA  - 2017/12
TI  - Determinants of Mispricing on Indonesian Sovereign Sukuk Auction
BT  - Proceedings of the 2nd International Conference on Indonesian Economy and Development (ICIED 2017)
PB  - Atlantis Press
SP  - 159
EP  - 163
SN  - 2352-5398
UR  - https://doi.org/10.2991/icied-17.2018.30
DO  - 10.2991/icied-17.2018.30
ID  - HayuPertiwi2017/12
ER  -