The Impact of Corporate Governance Index and Earnings Management on Firms’ Performance: A Comparative Study on the Islamic versus Conventional Financial Institutions in Pakistan

Ashfaq, S., Kayani, G. M., & Saeed, M. A. (2017). The Impact of Corporate Governance Index and Earnings Management on Firms’ Performance: A Comparative Study on the Islamic versus Conventional Financial Institutions in Pakistan. Journal of Islamic Business and Management, 7(1), 126-139

14 Pages Posted: 31 May 2018

See all articles by Saira Ashfaq

Saira Ashfaq

Bahria University - Bahria University, Islamabad

Ghulam Mujtaba Kayani

Comsats University Islamabad

Muhammad Ali Saeed

Bahria University - Bahria University, Islamabad

Date Written: 2017

Abstract

This study investigates the impact of corporate governance index and earnings management on firms’ performance and makes a comparative analysis of the selected Islamic and conventional financial institutions in Pakistan for the period of 2005-2015. Data of 20 KSE listed Islamic financial institutions (i.e., a few Islamic banks and mostly mud.¯arabah companies), and 35 KSE listed conventional financial institutions (i.e., conventional banks, mutual funds, insurance companies, and investment companies) have been used for analysis. The fixed effect model and random effect model have been used for analysis. The study finds that the corporate governance structure of conventional financial institutions is sound as compared to Islamic financial institutions. The study also concluded that the manipulation for earnings management is less in Islamic financial institutions as compared to conventional financial institutions in Pakistan. Therefore, it does not affect firm’s performance of Islamic financial institutions whereas the results of conventional financial institutions indicate that the manipulation of earnings management has an impact on their performance. Results of this study suggest that compliance with corporate governance practices is equally significant for both Islamic and conventional financial institutions.

Keywords: Corporate Governance Index, Earnings Management, Islamic Financial Institutions, Fixed Effect Model, Pakistan

JEL Classification: G3

Suggested Citation

Ashfaq, Saira and Mujtaba Kayani, Ghulam and Saeed, Muhammad Ali, The Impact of Corporate Governance Index and Earnings Management on Firms’ Performance: A Comparative Study on the Islamic versus Conventional Financial Institutions in Pakistan (2017). Ashfaq, S., Kayani, G. M., & Saeed, M. A. (2017). The Impact of Corporate Governance Index and Earnings Management on Firms’ Performance: A Comparative Study on the Islamic versus Conventional Financial Institutions in Pakistan. Journal of Islamic Business and Management, 7(1), 126-139, Available at SSRN: https://ssrn.com/abstract=3181038

Saira Ashfaq (Contact Author)

Bahria University - Bahria University, Islamabad

Islamabad
Pakistan

Ghulam Mujtaba Kayani

Comsats University Islamabad ( email )

Park Road
Chak Shahzad
Islamabad, North-West Frontier Province 44000
Pakistan

Muhammad Ali Saeed

Bahria University - Bahria University, Islamabad

Islamabad
Pakistan

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