Earnings management around Islamic bonds issuance

Halim, Zairihan Abdul; Xu, Suichen; Majid, Norakma Abdul

doi:10.1016/j.qref.2020.03.003

Cited by 3 publications

(2 citation statements)

References 43 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Although the values and principles of Islam have fostered a comprehensive set of responsible and ethical business practices, their implementation by ṣukūk issuers is not guaranteed. In practice, the Generally Accepted Accounting Principles (GAAP) can be exploited by management to serve internal interests, leading to misleading accounting reports for stakeholders, particularly in terms of contractual agreements (Abdul Halim et al, 2020b). Management practices and discipline play an essential role in fostering corporate growth and instilling investor confidence (Persakis & Iatridis, 2015).…”

Section: Full Disclosure To Support ṣUkūk Stakeholders' Needsmentioning

confidence: 99%

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Lemhishi,

Ghaith Mahaini

2024

IJIF

View full text Add to dashboard Cite

Purpose — This study aims to assess the first ṣukūk issuance in Libya from two main perspectives: the compliance of the ṣukūk with the Sharīʿah and its compliance with the Libyan legal system. Further, the study evaluates the adequacy of the provided financial disclosures to assess the feasibility of the ṣukūk issuance. Design/Methodology/Approach — A qualitative case study methodology was used to assess the ṣukūk issuance in question. For the assessment of disclosure adequacy, a tailored model was devised featuring main and subsidiary points of interest. Findings — The Sharīʿah assessment findings suggest potential non-compliance issues within the ṣukūk issuance. Additionally, there are significant gaps in the disclosure of key financial aspects related to both the ṣukūk originator and the project, potentially hindering stakeholders from gaining a comprehensive understanding of the issuance’s feasibility. Originality/Value — One unique advantage of this paper is that it is the first to gain access to the actual documentation of ṣukūk issuances in Libya. Research Limitations/Implications — The study’s scope was constrained by a scarcity of data and documents from Libyan parties. Practical Implications — After analysing the ṣukūk issuance, a framework of Sharīʿah and financial disclosures was developed. The application of the proposed framework can be extended to effectively assess other comparable ṣukūk offerings within the Libyan legal system. Social Implications — Libyan policymakers are recommended to strengthen the regulations governing forthcoming ṣukūk issuances. The proposed improvements should include mandating comprehensive disclosures regarding the financial viability of the ṣukūk issuance and ensuring ample disclosures to guarantee full adherence to Sharīʿah principles.

show abstract

Section: Full Disclosure To Support ṣUkūk Stakeholders' Needsmentioning

confidence: 99%

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Lemhishi,

Ghaith Mahaini

2024

IJIF

View full text Add to dashboard Cite

show abstract

“…A third strand is concerned with the impact of sukuk on Islamic banks’ performance and ratios (Mimouni et al , 2019; Bibi and Mazhar, 2019; Smaoui and Ghouma, 2020; Smaoui et al , 2020). A forth direction is related to the impact of sukuk issuance announcements on shareholders’ wealth and management practices (Ashhari et al , 2009; Ahmad and Rahim, 2013; Alam et al , 2013; Halim et al , 2020). A fifth and more recent direction investigates the diversification benefits to investors from holding different types of sukuk (Abdulkarim and Tabash, 2020; Pirgaip et al , 2021; Billah et al , 2022; Naifar, 2022; Arfaoui et al , 2022).…”

Section: Introductionmentioning

confidence: 99%

The impact of Tier 1 sukuk (Islamic bonds) on the profitability of UAE Islamic banks

Salhani¹,

Mouselli

2022

JFRA

View full text Add to dashboard Cite

Purpose The choice between different financing sources is governed by a number of finance theories, particularly, trade-off theory and pecking order theory. However, the special characteristics of Islamic finance, which forces the exclusion of conventional bonds, leave Islamic banks with limited number of alternatives. Tier 1 sukuk are distinguished type of sukuk that combines the features of conventional bonds and stocks. This paper aims to answer the following question: Does the issuance of Tier 1 sukuk positively affect Islamic banks’ profitability or is their impact concentrated on enhancing Islamic banks’ capital adequacy ratios? Design/methodology/approach The data set used in this study consists of all United Arab Emirates (UAE) Islamic banks that issued Tier 1 sukuk over the period 2010–2020. Pooled and fixed effects panel regressions of Tier 1 sukuk and other control variables on three proxies of Islamic banks’ profitability were run. The selection of fixed-effect model is based on Hausman test, redundant fixed effects and likelihood ratio test. Findings This study reveals novel findings. Tier 1 sukuk increases both earnings per share (EPS) and capital adequacy ratios. That is, this study finds that there is a positive significant impact of Tier 1 sukuk on EPS, which indicates that issuing more Tier 1 sukuk will generate more return to shareholders in terms of higher EPS because of the lower cost of Tier 1 sukuk compared to equity. However, this study finds that there is an insignificant impact of Tier on sukuk on both return on assets and return on equity. Hence, it is concluded that Tier 1 sukuk does not increase the risk appetite of UAE Islamic banks. Research limitations/implications Tier 1 sukuk is a niche instrument that has been recently used by Islamic banks. Hence, there are a limited number of Islamic banks that have issued this type of sukuk and consequently limited number of observations. Therefore, with the increased use of this instrument, a larger set of data will be available for examination. In addition, future research could examine the relationship between issuing Tier 1 sukuk and profitability in other countries where such sukuk have loss absorption feature. The impact of other types of sukuk, such as liability sukuk, on Islamic banks’ profitability could also be an interesting field of study. Practical implications This study recommends Islamic banks to issue more Tier 1 sukuk to enhance their profitability indicators while meeting Basel III accord. This study also recommends investors to purchase the stocks of Islamic banks that issue Tier 1 sukuk because they are able to offer them higher EPS. The authors advise the UAE regulators to allow Islamic banks to issue Tier 1 sukuk with loss absorption feature to enable Islamic banks engage in more risky activities that usually provide larger profits. This study also suggests that the Islamic Financial Services Board (IFSB) reclassifies Tier 1 sukuk, with loss absorption feature, within the highest quality of capital, common equity Tier 1, to encourage Islamic banks to issue this type of sukuk, especially Basel III accord and IFSB 15 require higher ratios of common equity Tier 1 to risk-weighted assets. Originality/value This research contributes to the existing literature in two ways. First, it adds to the existing literature on the impact of sukuk on Islamic banks profitability. That is, contrary to prior studies that merely investigate the impact of issuing ordinary sukuk on profitability, this study explores a distinguished type of sukuk, that is Tier 1 sukuk, that has been surprisingly ignored so far. Second, this study shows that it is not only capital adequacy ratios that have improved as a result of issuing Tier 1 sukuk but also Tier 1 sukuk reduce the cost of capital of UAE Islamic banks which has been reflected in a higher profitability proxied by EPS. Hence, these sukuk serve a dual function for Islamic banks by improving both capital adequacy and profitability ratios.

show abstract

Earnings Management, Earnings Quality, Board Gender Diversity and Cost of Equity Capital: Evidence from an Emerging Market

Saleh

Afifa

Al-hawatmah

et al. 2022

Global Business Review

View full text Add to dashboard Cite

This study seeks to analyse the direct association between earnings management (EM), earnings quality (EQ) and the cost of equity capital (CoEC). It also studies the mediating role of EQ and the moderating role of board gender diversity (BGD) in the context of the EM–CoEC nexus. Contradictions in the results of earlier investigations inspired the current study, with the findings filling a gap in the existing literature. This study presented a novel empirical model based on a mediation–moderation model, which sheds light on the mechanism of effect of numerous factors on the CoEC. The findings of this study reveal that the influence of EM practices on EQ is negative. Furthermore, the impact of EM practices on CoEC was positively significant, implying that the more EM practices there were, the higher the CoEC. At the same time, the findings show that EQ has a negative significant influence on CoEC. Additional findings confirm that EQ fully mediates the EM practices–CoEC nexus. Following that, in terms of BGD’s moderating role, the findings indicate that BGD has a significant negative impact on CoEC, and the interaction impact (EM × BGD) is positive and significant.

show abstract

Earnings management around Islamic bonds issuance

Cited by 3 publications

References 43 publications

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

Assessing Libya’s First Ṣukūk: Sharīʿah Compliance and Financial Viability

The impact of Tier 1 sukuk (Islamic bonds) on the profitability of UAE Islamic banks

Earnings Management, Earnings Quality, Board Gender Diversity and Cost of Equity Capital: Evidence from an Emerging Market

Contact Info

Product

Resources

About