Agency Costs and Sukuk Issuance: Evidence from Excess Cash Holdings and Bank Guarantees in Iran

Document Type : Research Paper

Authors

1 Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran

2 MSc. , Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran.

Abstract

This study examines the influence of agency costs on corporate decisions regarding the issuance of Islamic securities (Sukuk) and evaluates their effects on both the propensity and scale of Sukuk financing in the Iranian capital market. Owing to their asset-backed nature and the transparency embedded in Sharia-compliant contractual frameworks, Sukuk are expected to alleviate agency conflicts between managers and shareholders while strengthening corporate governance mechanisms. Agency costs are proxied by the excess cash ratio, and the empirical analysis is based on a sample of 169 firm-year observations drawn from 35 companies listed on the Tehran Stock Exchange that issued Sukuk during the period 2019–2023. To investigate the relationship between agency costs and Sukuk issuance decisions, as well as the moderating role of bank guarantees, the study employs logistic regression and multivariate regression techniques. The findings indicate that agency costs have a positive and significant effect on both the likelihood and volume of sukuk issuance. Accordingly, firms with higher levels of agency costs exhibit a greater tendency to utilize sukuk as a financing instrument to strengthen financial discipline and mitigate problems arising from agency conflicts. In addition, bank guarantees have a positive direct effect on issuance volume; however, their moderating role in the relationship between agency costs and sukuk issuance is not supported.The findings may be useful for corporate financing decisions and for policymaking in the Islamic capital market.

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References

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Journal of Accounting Advances
Volume 18, Issue 1
September 2026
Pages 1-32

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History

  • Receive Date: 02 April 2026
  • Revise Date: 25 June 2026
  • Accept Date: 01 August 2026

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