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, Saira; Kayani, Ghulam Mujtaba; Saeed, Muhammad

doi:10.26501/jibm/2017.0701-010

Cited by 3 publications

(4 citation statements)

References 12 publications

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“…Concerning CG, EM and performance relationship, Abbadi et al (2016) reported that EM is negatively affected by overall CGQ index categories in Jordan. Ashfaq et al (2017) also reported that the CG index has a significant positive impact on firms’ performance for conventional and Islamic financial institutions. Their findings indicate that, as CGQ improves, its ability to constrain EM also improves, leading to performance enhancements in firms.…”

Section: Methodsmentioning

confidence: 97%

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

Mensah

Onumah

2023

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Purpose This paper aims to shed light on an essential role that “female directors” on boards of companies in sub-Saharan Africa play towards corporate financial performance enhancement. The study observes how board gender diversity moderates the relationship between earnings management (EM) and financial performance of firms in sub-Saharan Africa from a dynamic perspective. Design/methodology/approach The study’s sample comprises 105 companies listed on the respective stock markets of nine sub-Saharan African countries. The data are collected from annual reports over the period 2007–2019, a total of 1,166 firm-year observations. Panel data models are used in the analyses. Findings The study finds that the performance effect of EM is contingent on board diversity and this finding persists even after controlling for dynamic endogeneity, simultaneity and unobserved time-invariant heterogeneity inherent in the EM and performance relationship. Research limitations/implications The findings should be understood within the context that, only available annual reports and audited financial statements that were filed with respective capital markets of the nine surveyed countries are used as source of information. Originality/value The current study is unique, in that, it is the first panel multi-cross-country investigation within Africa to introduce gender diversity in the study of the relationship between EM and firm performance. It therefore extends the agency theory by using gender diversity as a moderating variable in the EM–firm performance nexus.

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Section: Methodsmentioning

confidence: 97%

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

Mensah

Onumah

2023

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“…The most used theory during the period of 2002-2020 is the agency theory, which is used in 65% of this review study. Agency theory has been adopted in 52 studies which are quantitative in nature, linking it with firm performance [28,47,67,94,118,130,138] typically the researcher tried to link it with confit of interest hypothesis which arises due to separation of ownership and control [43,72]. Additionally, the agency theory has been applied to the topics of earnings management [19,42,63,73,75,89,107] and financial reporting quality [119,129] to check the board of directors monitoring and controlling role over the companies' management.…”

Section: Theoretical Underpinning and Linked Theoriesmentioning

confidence: 99%

Corporate governance looking back to look forward in Pakistan: a review, synthesis and future research agenda

et al. 2022

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The basic aim of this paper is to systematically review the corporate governance research trends in Pakistan and to give directions for future researchers in this field. The methodology adopted in this paper is “Systematic Literature Review,” 108 papers have been used from the period 2002–2020 along with 17 research theses in this study. The findings of this study show two trends in corporate governance research first one form 2008 to 2016 and the second one is from 2017 to 2020. The first trend shows that corporate governance (variables) is linked with traditional topics such as firm performance, dividend policy, capital structure, cost of capital and earnings management. The theory which is mostly used in the first corporate governance trend is the agency theory. In the second trend, corporate governance (variables) are linked with multiple issues while taking various theoretical perspectives such as risk taking, tunneling, CSR, investment portfolios, board-related issues, financial distress and much more. This paper has identified and filled the research gap by writing a comprehensive review paper of the prevailing corporate governance literature and has given directions for future researchers to consider it. To the best of researchers’ knowledge, this is the first study that has systematically reviewed and synthesized the corporate governance literature by adopting the systematic literature review methodology in Pakistan an emerging economy. It is an extensive effort for the purpose to encourage the interested researchers/scholars to add and expand their contributions to the corporate governance literature in Pakistan on the potentially identified areas of corporate governance.

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“…In Islamic banks, the information asymmetry creates moral hazard problems related to agency theory when there is a high ratio of deposits in the banks. This calls for governance reforms in Islamic banks (Ashfaq et al, 2017). Therefore this study will analyze the previous literature in a critical and systematic way to ascertain if Islamic banks are distributing profits in a realistic manner or there are some anomalies in the PLS paradigm of Islamic banks.…”

Section: Problem Statementmentioning

confidence: 99%

“…PLS principle asserts that the real profits earned must be shared between the parties involved. Still, the Islamic banks offer profits which indicate profit distribution management (PDM) (Farook, Hassan, & Lanis, 2011;Abdul-rahman & Nor, 2016;Ashfaq et al, 2017;Chowdhury, Shoyeb, Akbar, & Islam, 2017). PDM is an ex post effect of the intermediary function performed by Islamic banks (Taktak, 2014;Farook, Hassan & Clinch, 2012;Siswantoro, 2017;Wafaretta, Rosidi, & Rahman, 2016;Hamza 2016).…”

Section: Introductionmentioning

confidence: 99%

Constraints Framework for Fair Profit Distribution in Partnerships for Islamic Deposits: A Critical Analysis of Literature

Hayat

Gul

Khan

2020

GSSR

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This study critically questions the PLS paradigm of Islamic banks in fair distribution of profits.PLS paradigm theoretically enforces that there should not be a significant difference between the returns offered to IAH and returns offered to shareholders. Smoothing of return can have a potential problem as IAH do not have any control over managerial decisions while banks owner equity is affected through absorption through displaced commercial risk. Therefore, this study analyzes the previous literature in a critical and systematic way to ascertain if Islamic banks are distributing profits in a realistic manner or there are some anomalies in the PLS paradigm of Islamic banks. Furthermore, the literature was analyzed critically to find out the associated factors and constraints that lead Islamic banks to impairment of PLS paradigm. Through analysis of the literature, smoothing of income and PDM is discovered in the empirical studies of different researchers.Furthermore, constraints to efficiently and effectively managing the fair distribution of profits have been identified in the literature. These constraints shape several factors, which are broadly categorized as banking characteristics, macroeconomic and financial environment, geographic and population characteristics; corporate and legal environment. A diagrammatic representation of constraints framework is suggested based on available literature. Furthermore, future directions for future research are provided at the end

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

Cited by 3 publications

References 12 publications

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

Corporate governance looking back to look forward in Pakistan: a review, synthesis and future research agenda

Constraints Framework for Fair Profit Distribution in Partnerships for Islamic Deposits: A Critical Analysis of Literature

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