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Top1. Introduction
In contemporary times, Islamic banking and finance have recorded tremendous growth since a few decades ago. The Islamic financial system has emerged and evolved into a sustainable and vibrant counterpart of the traditional financial system. The swift development of the domestic Islamic banking system, accentuated by considerable expansion and advancements in Islamic banking and finance, has become significantly more important to fulfill the changing needs of the modern economy. The interdependence of these essential structural elements produces an all-encompassing environment conducive to the Islamic financial system's ability to function as an effective conduit for mobilizing resources and providing finance for profitable economic activity. The general stability of the Islamic financial system is aided by this structure, which also increases the Islamic financial system's resilience and robustness to absorb financial shocks.
Religious norms affect not only human behavior but also corporations. Religious norms influence individual attributes and corporate decision-making (Adhikari & Agrawal, 2016). An empirical study suggested that the persistence of human characteristics leads to adherence to strict policies (Malmendier et al., 2011). And such human traits are largely influenced by religious and social norms. Several studies asserted that social norms induced by religion could facilitate sound moral judgment and risk aversion in the organization (Hassan & Aliyu, 2018; Trinh et al., 2020). Nonetheless, religiously induced social norms influencing the banking risk management system (Arnaboldi et al., 2020; Baele et al., 2014; Fungáčová et al., 2019) vary depending on the variations in cultures, financial systems, and legal frameworks worldwide (Beck et al., 2003).
The global financial crisis of 2007-2008 calls into question the legitimacy of the financial mechanism system, where it is alleged that conventional securitization played a key part in disrupting global financial markets (Kara et al., 2016; Kiff & Kisser, 2014). Unrestricted lending, less oversight, screened incentives, and the shifting of credit risks by financial institutions are the prime reasons for this destabilization. (Franke & Krahnen, 2013; Panetta & Pozzolo, 2012). It is posited that the financial crisis may have accelerated its growth and potential market share even further as “principles based on religious law shelter the industry from the worst of the financial crisis” (Hasan & Dridi, 2011). Islamic banking may have been insulated from the effects of the financial crisis by its asset-based and risk-sharing qualities and its obligation only to involve products that minimize excessive leverage and disruptive financial innovation (Baele et al., 2014).
They have risen from modest and unknown funding vehicles to well-established securities in several nations over the last two decades, rivaling conventional bonds in many countries. Numerous researchers have stressed the characteristics and rationale for issuing (Mohamed et al., 2015; Nagano, 2016, 2017; Naifar et al., 2017). Existing Sukuk research remains limited and fragmented across several topics, despite the rise in global Sukuk issuances and market expansion (Ibrahim, 2015). Sukuk are Islamic securities with structural similarities to bonds. Due to the higher ethical criteria set by Shariah, particularly non-engagement in prohibited activities, Sukuk financing is expected to demand a higher threshold of investor trust (e.g., alcohol, gambling, and pornography) (Ashraf et al., 2020). With its ethical substance and financial characteristics, Sukuk is a fairly unique financial instrument.