A review of the characteristics of corporate and Shariah governance mechanisms and earnings quality Online publication date: Thu, 07-Mar-2019
by Siti Fariha Muhamad; Zunaidah Sulong
International Journal of Critical Accounting (IJCA), Vol. 10, No. 6, 2018
Abstract: This paper aims to present a review of past literature on Shariah governance's regulatory frameworks, characteristics of mechanisms and relationship with financial reporting quality focusing on earnings quality. This paper specifically examines cross-country empirical studies. The different types of Shariah governance regulatory frameworks in various countries that operate Islamic banking were identified. A synthesis of empirical findings demonstrated that characteristics of corporate and Shariah governance in Islamic banking have been examined in relation to performance, efficiency, risk behaviour and earnings quality. The board of directors (BOD) and Shariah supervisory board (SSB) are the most examined mechanisms. Besides, the measurements of earnings quality have been proxied by discretionary accrual, loan loss provision and earnings loss avoidance. It is concluded that the presence of Shariah governance have impacted the managerial behaviour and quality of financial reporting of Islamic banks.
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