Islamic corporate governance quality and value relevance of accounting information in Islamic banks
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 18 July 2023
Abstract
Purpose
The study aims to investigate the Shari’ah governance quality effectiveness, at the bank and national levels, on the value relevance of Islamic banks’ (IBs’) earning per share and book value per share.
Design/methodology/approach
Quantitative analyses are conducted using a panel of 40 listed IBs from 12 countries during 2012–2019. Data were retrieved from the Refinitiv Eikon database and banks’ annual reports.
Findings
The findings suggest that Shari’ah supervisory boards’ attributes negatively influence the value relevance of accounting information while the internal procedures positively impact it. The results also provide evidence of a complementary effect between Shari’ah governance mechanisms at the bank and national levels on the value relevance of accounting information.
Practical implications
IBs’ boards and managers need to be more aware of the role of Shari’ah governance and its impact on value relevance. The observed complementarity between Shari’ah governance systems at the bank and national levels may incite regulators to include comprehensive Shari’ah governance regulations in their best practices. Strengthening collaboration between regulators and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is also required to create an enabling environment for investors to rely on the AAOIFI accounting standards in their investment decision-making process.
Originality/value
Existing studies tend to ignore the effectiveness of Shari’ah governance quality at the bank level on value relevance. There is a similar lack of empirical research on the effectiveness of the centralized Shari’ah governance scheme on accounting issues.
Keywords
Acknowledgements
The authors are grateful to Dr Serge Agbodjo (Paul Sabatier University Toulouse III, France) for his helpful comments on the paper. The authors also thank Amira Wannes (National Institute of Administration, Tunisia) for her involvement in the data investigation.
Authors statements: Kaouther Toumi, Conceptualization, Methodology, Software, Formal analysis, Investigation, Writing – Original Draft, Writing – Review and Editing. Amal Hamrouni, Conceptualization, Writing – Original Draft, Writing – Review and Editing.
Declarations of interest: none.
Citation
Toumi, K. and Hamrouni, A. (2023), "Islamic corporate governance quality and value relevance of accounting information in Islamic banks", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-04-2023-0183
Publisher
:Emerald Publishing Limited
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