The Impact of Sukuk Issuance on Stock Prices: New Insights from the Jakarta Stock Exchange

Abstract This study fills a critical gap in the Islamic finance literature in emerging markets by examining the market reaction to Sukuk issuances of firms listed on the Jakarta Stock Exchange (JKSE) between January 2023 and October 2024. Drawing on signaling theory, it is hypothesized that Sukuk issuances can signal positive firm performance and financial health, thereby influencing investor behavior. A market-adjusted event study methodology is employed, where abnormal returns (AR) and cumulative abnormal returns (CAR) are calculated over an event window of -10 to +10 days, where statistical significance is tested through t-values ​​and p-values. Our results reveal heterogeneous responses across firms. Some firms show statistically significant positive ARs after issuance, while others show neutral or negative responses. The variation in CARs suggests that Sukuk issuances are perceived differently depending on firm-specific factors and broader market conditions. These findings contribute to the Islamic finance literature by providing empirical evidence on the financial market impacts of Sukuk, especially in Indonesia, where Islamic finance is growing rapidly. The research highlights the role of Sukuk as a financing tool in enhancing market perceptions and investor confidence, offering practical implications for both policy makers and corporate managers.