Do islamic banks employ less earnings management?

Majdi A. Quttainah, Liang Song, Qiang Wu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

55 Citations (Scopus)

Abstract

In this article, we examine whether Islamic banks are less likely to manage their earnings than non-Islamic banks and how Islamic banks' unique corporate governance system, especially Shari'ah Supervisory Boards, impacts earnings management behaviors within Islamic banks. Using a sample of Islamic banks and their matched non-Islamic banks in 15 countries, we find that, first, Islamic banks are less likely to conduct earnings management as measured by both earnings loss avoidance and abnormal loan loss provisions. Second, there are no significantly different earnings management behaviors between Islamic banks with and without Shari'ah Supervisory Boards. Third, several Shari'ah Supervisory Board characteristics, such as size and the presence of members from Auditing Organization for Islamic Financial Institutions, are important determinants of the earnings management of Islamic banks who have Shari'ah Supervisory Boards.

Original languageEnglish
Pages (from-to)203-233
Number of pages31
JournalJournal of International Financial Management and Accounting
Volume24
Issue number3
DOIs
Publication statusPublished - Sep 2013
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance

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