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Earnings management behaviors under different monitoring mechanisms: The case of Islamic and conventional banks

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  • Abdelsalam, Omneya
  • Dimitropoulos, Panagiotis
  • Elnahass, Marwa
  • Leventis, Stergios

Abstract

We investigate the impact of organizational religiosity on the earnings quality of listed banks in the Middle East and North Africa region. We analyze Islamic banking institutions, which operate within strict religious norms and extended accountability constraints, and compare them with their conventional counterparts during 2008–2013. We find that Islamic banks are less likely to manage earnings and that they adopt more conservative accounting policies. Based on these findings, we argue that religious norms and moral accountability constraints in these organizations have a significant impact on financial reporting quality and agency costs, which have implications for both regulators and market participants.

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  • Abdelsalam, Omneya & Dimitropoulos, Panagiotis & Elnahass, Marwa & Leventis, Stergios, 2016. "Earnings management behaviors under different monitoring mechanisms: The case of Islamic and conventional banks," Journal of Economic Behavior & Organization, Elsevier, vol. 132(S), pages 155-173.
  • Handle: RePEc:eee:jeborg:v:132:y:2016:i:s:p:155-173
    DOI: 10.1016/j.jebo.2016.04.022
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    1. repec:gam:jsusta:v:10:y:2018:i:1:p:137-:d:125945 is not listed on IDEAS
    2. repec:eee:bracre:v:50:y:2018:i:3:p:291-305 is not listed on IDEAS
    3. repec:eee:pacfin:v:47:y:2018:i:c:p:129-149 is not listed on IDEAS
    4. Sorwar, Ghulam & Pappas, Vasileios & Pereira, John & Nurullah, Mohamed, 2016. "To debt or not to debt: Are Islamic banks less risky than conventional banks?," Journal of Economic Behavior & Organization, Elsevier, vol. 132(S), pages 113-126.
    5. repec:eee:accoun:v:53:y:2018:i:1:p:20-32 is not listed on IDEAS

    More about this item

    Keywords

    Financial reporting quality; Earnings management; Conservatism; Islamic banks; MENA countries; Agency costs;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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