(2014) 'Dynamic capital structure and political patronage : the case of Malaysia.', International review of nancial analysis., 31 . pp. 117-128. Further information on publisher's website:http://dx.doi.org/10.1016/j.irfa.2013.11.004Publisher's copyright statement: NOTICE: this is the author's version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reected in this document. Changes may have been made to this work since it was submitted for publication. A denitive version was subsequently published in International Review of Financial Analysis, 31, January 2014, 10.1016/j.irfa.2013.11.004. Additional information:Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details.

This study examines the effect of two potential sources of ethical principles on earnings quality: corporate social responsibility (CSR) and membership in a Shariah index. We define membership in a Shariah index as the adherence to an ethical code that relates to Islam. Our sample comprises firms in ten European Union countries for the period from 2003 to 2013. The empirical results show that firms with a high degree of CSR are less likely to manage earnings. In contrast, membership in a Shariah index leads to earnings manipulation. Our results are robust after using several alternative quality metrics for earnings. Furthermore, our empirical results indicate that highly rated CSR firms that are not Shariah-compliant are less likely to engage in earnings manipulation. Further, institutional factors are also important in determining the link between CSR, Shariah-compliance, and the quality of financial reporting.

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This article analyzes the traditional modes of Islamic project financing in light of modern financial engineering. The vehicles elaborated include debt, hybrid, and equity instruments. The first category includes the Qardh Hasan (benevolent loan), Murabahah (mark‐up), Ijara (leasing), and Islamic income/revenue bond facilities; the second incorporates the classical Mudharabah (profit‐sharing) contract; while the third category comprises the Musharakah (equity) vehicle. The Mudharabah contract can be synthetically created as a combination of a Cost‐plus (Murabahah) facility and an Option (Al‐ikhtiyarat) instrument to endogenously determine the profit sharing parameter. It is malleable in two‐dimensions depending on the financial goals and the risk profile of the investor. Securitization of the Mudharabah facility avoids the controversy of Bai' al‐dayn bi al‐dayn (sale of one set of debt security with another). Finally, the design of financial contracts via variants of Mudharabah securities such as income bond and participating bond is illustrated in a numerical example. © 1999 John Wiley & Sons, Inc.