Abstract:

As the Islamic financial market developed, government of Indonesia expand their instrument variation and started to issue Islamic Bond (sukuk) in 2008. However, there is still lack of empirical literature regarding sukuk performance, particularly in the pricing model. This paper attempts to examine underpricing indication in sukuk issuance during 2010-2016 and study the factors that might explain its persistence. The underpricing, further, may hamper the market as it leads to revenue loss for the company. To examine the existence of sukuk underpricing issuance, this study uses derived formulas from Jegadesh (1993) and Indonesian Ministry of Finance Regulation number 50/PMK.08/2012 which consider adjustment of two days holding period from auction day to settlement. In contrast to the theory, result of this study shows that average sukuk issuance in Indonesia indicates a higher auction bid (T+0) than in settlement (T+2) period.