Developing financial disclosure quality in sukuk and bond market: Evidence from Indonesia, Malaysia, and Australia

This research investigates the relationships among financial disclosure quality (FDQ), accounting-based risks (ABRs), sukuk, and bond market. Using three samples of different countries (Indonesia and Malaysia for sukuk ratings, and Australia for bond ratings) through pooled EGLS regression, the results suggest that FDQ related to reliability affects sukuk ratings, but not bond ratings. Leverage is found to be the most influential on sukuk and bond ratings. FDQ is, to some extent, found to affect the relationship between ABRs (i.e., operating income, leverage and ROI) and sukuk or bond ratings. Differentiating between sukuk and bond issuers is not empirically proven. Additionally, ancillary evidence that relevance is more pronounced than reliability; and bond ratings are more concerned with the variability of financial measures than sukuk, is left to further research for confirmation. This is ample evidence for the expanded value-relevance of financial disclosure in sukuk and bond market.