The Impact of Tier 1 Sukuk (Islamic Bonds) on the Profitability of UAE Islamic Banks

  • 28 May 2022
  • Recently published Research - Business


Alaa Salhani and Sulaiman Mouselli

Published in

Journal of Financial Reporting and Accounting, EarlyCite (ahead-of-print), April 2022.



The choice between different financing sources is governed by a number of finance theories, particularly, trade-off theory and pecking order theory. However, the special characteristics of Islamic Banks, which forces the exclusion of conventional bonds, leave Islamic banks with limited number of alternatives. Tier 1 sukuk are distinguished type of sukuk that combines the features of conventional bonds and stocks. This paper aims to answer the following question: Does the issuance of Tier 1 sukuk positively affect Islamic banks’ profitability or is their impact concentrated on enhancing Islamic banks’ capital adequacy ratios?

Keywords: Tier 1 Sukuk, Islamic Banks, Basel III, United Arab Emirates.

Link to abstract