Loan Loss Provisioning in OIC Countries: Evidence from Conventional vs. Islamic Banks

Journal of King Abdulaziz University: Islamic Economics, Vol. 28, No. 1, pp. 23-59, (January 2015)

45 Pages Posted: 3 Apr 2017

See all articles by Ali Ashraf

Ali Ashraf

Frostburg State University

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Syed Abul Basher

East West University

Multiple version iconThere are 2 versions of this paper

Date Written: January 25, 2014

Abstract

Using a sample of 291 banks from 35 OIC (Organization of Islamic Conference) member Muslim countries with 2078 bank year observations from 2003 to 2008, we analyze if bank earning management in terms of Loan Loss Provisioning (LLP hereafter) is affected by the banking nature whether Islamic or conventional, by the bank accounting standards whether rulebased local GAAP or principle-based IFRS, and by the bank listing status. We argue that Islamic banks may exhibit lower signs of earning management, as the Sharia’h Supervisory Boards (SSB hereafter) in Islamic banks may work as an additional tier into the governance system. On the use of accounting standard, we argue that banks using IFRS standard may exhibit lower evidence of earning management, as IFRS requires managers to disclose more accounting information as compared to Local GAAP. We report empiric results supporting both the arguments.

Keywords: International Financial Markets, Banks, Other Depository Institutions, Micro Finance Institutions, Mortgages, Accounting

JEL Classification: G15, G21, M41

Suggested Citation

Ashraf, Ali and Hassan, M. Kabir and Basher, Syed Abul, Loan Loss Provisioning in OIC Countries: Evidence from Conventional vs. Islamic Banks (January 25, 2014). Journal of King Abdulaziz University: Islamic Economics, Vol. 28, No. 1, pp. 23-59, (January 2015), Available at SSRN: https://ssrn.com/abstract=2944491

Ali Ashraf (Contact Author)

Frostburg State University ( email )

Frostburg, MD 21532
United States

HOME PAGE: http://www.frostburg.edu/dept/mktfin/department-faculty/dr-ali-ashraf/

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Syed Abul Basher

East West University ( email )

Aftabnagar Main Road
Plot No. A-2
Dhaka, 1219
Bangladesh

HOME PAGE: http://syedbasher.org

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