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Essays on corporate governance and accounting conservatism

Corporate governance and accounting conservatism in

Subject ManagementBanks and banking--Islamic countriesFinancial institutions--Islamic countries Extent1 online resource xii, 118 p. DescriptionIn this study, I empirically investigate relative efficiency, accounting conservatism, and corporate governance in Islamic banking. It is crucial for Islamic banks to be efficient in order to withstand competitive pressures and financial crisis. Academic evidence, however, from Islamic banking studies is inconclusive on the question of whether Islamic banks are more or less efficient than their conventional counterparts.

There is also doubt on the relevance of conservatism concept to financial reporting practices of Islamic banking because of Zakah Islamic tax. Moreover, the institution of Shariah supervisory board SSB as an additional layer of governance in Islamic banks plays an important role in affecting bank risk-taking. The first essay empirically examines the relative efficiency of Islamic banks compared to conventional banks using a sample of Islamic and conventional banks from the Bankscope database.

I define efficiency as the level of capital buffer banks would maintain for any given level of asset risk. Due to profit and loss sharing PLS scheme that dominates the deposit side of Islamic banks, majority of the depositors are equity-like holders whose returns depend on bank performance Archer and Karim, 2009. Therefore, I hypothesize that Islamic banks would maintain lower capital reserves, for any given level of asset risk, compared to their conventional counterparts.

However, I find that Islamic banks hold more capital and reserves, for a given level of asset risk, which suggest that Islamic banks are less efficient than their conventional counterparts. I find that Islamic banks that engage more in Islamic mode of finance and are highly funded by PLS contracts are less efficient than Islamic banks that engage less in such contracts. In further cross-sectional tests, I find that smaller Islamic banks are significantly less efficient than larger Islamic banks due to the absence of risk diversification tools in small banks, and that Islamic banks tend to be less efficient before and after the financial crisis of 2007-2008.

  1. Three essays on conditional accounting conservatism. Accounting conservatism and the limits to earnings management corporate governance hermalin and weisbach
  2. What is good corporate governance accounting essay 21 introduction the practice of good corporate governance helps to differentiate one organisation from others. Empirical in this paper, we empirically investigate whether us listed commercial banks with effective corporate governance structures engage in higher levels of.
  3. Accounting conservatism and corporate investment decisions. We predict that firms with stronger corporate governance will exhibit a higher degree of accounting conservatism governance level is assessed using a.
  4. Corporate governance is the way in which boards oversee the running of a company by its managers and how board members are in turn accountable to shareholders and the.
  5. Many Islamic accounting scholars cast doubt on the relevance of conservatism concept.

Adherence to Shariah rules, Islamic bank, as a separate entity, is obligated to pay Islamic tax or Zakah in order to maintain social justice and alleviate poverty. This indicates that the financial reporting of Islamic banks would be influenced by such obligation.

Many Islamic accounting scholars cast doubt on the relevance of conservatism concept. Some scholars claim that the conservatism concept is not relevant for Islamic accounting reporting because it leads to understating assets that could be subject to Zakah Adnan et.

Others argue, however, that what is meant in Islamic accounting by conservatism concept is the selection of the accounting techniques that has the most favorable impact on society not the owner. I posit that Islamic banks apply an anti-conservatism practices in financial reporting to be consistent with Shariah rules.

Using Basu 1997 and Ball and Shivakumar 2005 models, I find that Islamic banks recognize earnings decrease on timely bases while recognize earnings increase with delay.

This would suggest that Islamic banks take the same accounting conservatism approach as conventional banks and Shariah does not play significant roles in term of financial reporting. In addition, I find that Islamic banks report more conservatively than conventional banks due to additional obligation of Zakah payment and higher litigation risk exposed to the Islamic banks. In third essay, I examine whether the board structure of Islamic bank, in particular Shariah supervisory board SSBinfluence risk-taking behaviors.

  • Shareholder in affecting the level of accounting conservatism thirdly, this essay governance determines accounting conservatism of corporate disclosure, and;
  • Description in this study, i empirically investigate relative efficiency, accounting conservatism, and corporate governance in islamic banking;
  • Database of free accounting essays accounting conservatism and risk introductiona sprouting issue in corporate governance and the business world is the.

Under Shariah rules, Islamic banks are expected to engage in less risk-taking investments. The result is consistent with Pathan 2009 that larger number of directors in the board is less effective in monitoring bank activities due to coordination and free-riding problems.

Consistent with Shivdasani and Yermack 1999Christy et al 2009and Falato et al.

Essays on corporate governance and accounting conservatism

Scholars with multiple seats are too busy to mind the business and unable to provide meaningful managerial monitoring. Further analysis provides some evidence that most of the findings on the association between SSB structure and bank risk are derived from countries in the Gulf Corporation Council GCC where Shariah governance is ruled internally at bank level, and such associations are more pronounced after the global financial crisis.

This study sheds light on current practices of Islamic governance and emphasizes the need for well-functioning Shariah board that works with board of directors and management to better realize the goals of Islamic banks in practice.