Corporate net income and payout smoothing under Shari'ah compliance

Balli, Faruk; Bruin, Anne de; Balli, Hatice Ozer; Karimov, Jamshid

doi:10.1016/j.pacfin.2020.101265

Cited by 9 publications

(4 citation statements)

References 35 publications

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“…Regarding the variable of net financial income (NFI) to investigate how the level of exposure to fair value accounting moderates the changes in the importance of the accounting value of net capital and net income during a crisis period, according to (Adwan et al 2020), the importance of the accounting value of capital increases, while that of net income decreases during the financial crisis. According to (Balli et al 2020), borrowing and investment are the main channels for smoothing out a large number of fluctuations in net financial income, while according to the results of this analysis, to have a sustainable profit, businesses must increase the performance of the total business income in a circular economy.…”

Section: Discussionmentioning

confidence: 97%

Investigating Accounting Factors through Audited Financial Statements in Businesses toward a Circular Economy: Why a Sustainable Profit through Qualified Staff and Investment in Technology?

Lulaj

Dragusha

Hysa

2023

Administrative Sciences

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This study examines the investigation of accounting factors through audited financial statements in businesses by analyzing the qualified staff and investment in technology for sustainable profit. Therefore, the main goal is to analyze whether qualified staff and investment in technology affect the sustainability of profit in businesses through the investigation of accounting factors in the audited financial statements toward a circular economy, more specifically in these financial items: total assets (TASS), and intangible assets (IASS), total liabilities (TLIA), total income (TREV), and net financial income (NFI), based on questions about which financial items businesses should take care of, as well as businesses that do not invest in technologies and skilled staff: does this hinder profit sustainability? Therefore, for this study, data are collected from the financial statements (balance sheet and income statement) of (N = 800) businesses according to their activity (manufacturing businesses = 256, service businesses = 192, and distribution businesses = 353) during the period (2020–2022). The results show that each of the variables and factors had a significant impact on sustainable profit through the circular economy in (N = 800) businesses. However, to have a sustainable profit in business, it is strongly recommended to pay attention to these findings: businesses should (a) be careful with total liabilities, (b) increase the performance of total assets, (c) increase the performance of net financial income, (d) increase the performance of total business income, and (e) increase and develop the skills of workers, as well as improve technology (equipment, machinery, etc.). With implications and limitations, it was difficult to access some of the financial statements; there are only a limited number of variables, so the same models can be analyzed for other businesses, variables, and countries.

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Section: Discussionmentioning

confidence: 97%

Investigating Accounting Factors through Audited Financial Statements in Businesses toward a Circular Economy: Why a Sustainable Profit through Qualified Staff and Investment in Technology?

Lulaj

Dragusha

Hysa

2023

Administrative Sciences

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“…However, when we have Shari’ah‐compliant firms in our sample, dividend payouts fall as political risk increases. When firms are Shari’ah compliant, their capabilities to smooth/increase payouts and, therefore, retain the positive attitude of investors, are limited (Balli et al ., 2020). This might be due to financial characteristics that Shari’ah requirements dictate: low leverage, low accounts receivable, as well as low cash and interest‐bearing securities.…”

Section: Methodology and Estimationsmentioning

confidence: 99%

Firm‐level political risk and Shari’ah compliance: equity capital cost and payouts policy

Karimov

Balli

et al. 2020

Accounting & Finance

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Using a novel Economic Policy Uncertainty (EPU) firm‐level political risk index as a measurement for political risk corporations face, we examine the impact of firm‐level political risk on the cost of equity capital (COE) and dividend payouts policy of firms. The paper aims to shed light on adaptation implications of Shari’ah compliance (SC) on firms exposed to firm‐level political risk. We analyse if adoption of Shari’ah compliance requirements (SCR) mitigates firm‐level political risk and impacts the cost of equity and dividend policy. Our benchmark results show that a 1 percent increase in exposure to political risk contributes to a rise in the COE by 0.1 percent and in dividend payout by 5 percent. We find that SC eventually leads to a fall in the COE and in dividend payouts, despite exposure of the firm to political risk. Our findings have important policy implications that are relevant to Shari’ah‐compliant equities and beyond.

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“…In addition, Islamic corporate finance is quickly growing in relevance but is still in its infancy (Alzahrani, 2019; Hassan et al , 2021). However, there have been a few studies related to Islamic corporate finance; these include the impact of ESG on Shariah -compliant firm risk (Hassan et al , 2021), the dividend payout behaviour (Imamah et al , 2019; Balli et al , 2020) and capital structure of Shariah -compliant firms (Yildirim et al , 2018; Alnori and Alqatani, 2019). The current study adds to the literature on Islamic corporate finance by studying the impact of ESG on the financial performance of Shariah -compliant firms.…”

Section: Introductionmentioning

confidence: 99%

Environmental, social and governance (ESG) practices and financial performance of Shariah-compliant companies in Malaysia

Lee

Isa

2022

JIABR

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Purpose This study aims to examine the impact of environmental, social and governance (ESG) practices on the financial performance of Malaysian Shariah-compliant companies over the period 2010–2017. Design/methodology/approach Panel regression models are used for this study to test the effect of ESG practices on the performance and the interaction variables to examine the impact of double ESG – Shariah screening on firms’ performance. Findings This study finds a positive relationship between ESG practices and financial performance, suggesting that ESG practices can enhance firm value. Additionally, the authors also find evidence that double ESG–Shariah screening can enhance the ESG relationship with performance. These results are consistent and robust to three proxies for financial performance and different estimation techniques. Practical implications The positive relationship between ESG practices and performance implies that firms should improve their ESG commitment as this is consistent with enhancing performance. Originality/value This study presents evidence concerning the impact of ESG practices on the financial performance of Shariah companies, thereby paving the way for further studies in sustainability investments in Shariah companies.

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Corporate net income and payout smoothing under Shari'ah compliance

Cited by 9 publications

References 35 publications

Investigating Accounting Factors through Audited Financial Statements in Businesses toward a Circular Economy: Why a Sustainable Profit through Qualified Staff and Investment in Technology?

Investigating Accounting Factors through Audited Financial Statements in Businesses toward a Circular Economy: Why a Sustainable Profit through Qualified Staff and Investment in Technology?

Firm‐level political risk and Shari’ah compliance: equity capital cost and payouts policy

Environmental, social and governance (ESG) practices and financial performance of Shariah-compliant companies in Malaysia

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