Do Islamic Banks Employ Less Earnings Management?

31 Pages Posted: 10 Sep 2013

See all articles by Majdi Anwar Quttainah

Majdi Anwar Quttainah

Kuwait University

Liang Song

affiliation not provided to SSRN; University of Massachusetts Dartmouth

Qiang Wu

Hong Kong Polytechnic University-School of Accounting and Finance

Date Written: September 2013

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.

Suggested Citation

Quttainah, Majdi Anwar and Song, Liang and Song, Liang and Wu, Qiang, Do Islamic Banks Employ Less Earnings Management? (September 2013). Journal of International Financial Management & Accounting, Vol. 24, Issue 3, pp. 203-233, 2013, Available at SSRN: https://ssrn.com/abstract=2323094 or http://dx.doi.org/10.1111/jifm.12011

Majdi Anwar Quttainah (Contact Author)

Kuwait University ( email )

Kuwait

Liang Song

affiliation not provided to SSRN

University of Massachusetts Dartmouth ( email )

285 Old Westport Road
N Dartmouth, MA 02747
United States

Qiang Wu

Hong Kong Polytechnic University-School of Accounting and Finance ( email )

5182095596 (Phone)
12047-4974 (Fax)

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