This paper aims to provide a historical review for several leading documents in relation to the objectives of financial statements. These documents are: The Trueblood Report, The…
Abstract
Purpose
This paper aims to provide a historical review for several leading documents in relation to the objectives of financial statements. These documents are: The Trueblood Report, The Corporate Report, Making Corporate Reports Valuable; and Guidelines for Financial Reporting Standards. These documents have a significant importance in financial reporting literature.
Design/methodology/approach
Content analysis approach was adopted in this study given its analytical and comparative nature of historical documents. In terms of studying historical data, content analysis main advantage is objectivity, in addition to its ability to provide unobtrusive evidence of historical trends.
Findings
The historical review showed that the basic objective of financial statements is concerned with providing useful information for economic decision making. In addition, it emphasized that information is useful when: it shows economic reality of the financial statements (i.e. balance sheet, income statement and cash flow statement); and it is relevant and reliable to users.
Practical implications
In view of the comparison and analysis above, the four documents emphasized on the usefulness of accounting for decision‐making purposes and as such it leads to an inference that accounts should essentially portray economic reality.
Originality/value
In light of current financial reporting failure, it is important to revise leading documents in relation to the objectives of financial statements and to evaluate current developments. This paper is of much value to the accounting profession, as well as to the corporate reporting setters.
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Tamer Mohamed Shahwan and Yousef Mohammed Hassan
The current study aims to explore and measure the profitability, marketability, and social disclosure efficiency of UAE banks using a nonparametric frontier method – data…
Abstract
Purpose
The current study aims to explore and measure the profitability, marketability, and social disclosure efficiency of UAE banks using a nonparametric frontier method – data envelopment analysis (DEA).
Design/methodology/approach
In order to estimate the relative efficiency of the Emirati banks based on three different dimensions: profitability, marketability and social disclosure, a sample of 20 listed Emirati banks in 2009 is first selected. Second, a disclosure index to measure the extent of their social disclosure is developed and utilized. Third, the input‐oriented version of DEA model is deployed to estimate their technical and scale efficiency.
Findings
Based on nonparametric Wilcoxon signed rank test, paired‐difference t test and sign test, this study reports significant evidence that the UAE banks are performing much better in profitability and social disclosure activities than marketability activities. The results also provide additional evidence regarding the positive relation observed between the performance of social disclosure and profitability performance.
Research limitations/implications
The sample is small, although it includes all relevant Emirati banks. Moreover, follow‐up research using panel data derived from the UAE banking sector are required to test and generalize the current results.
Originality/value
The paper is original in its approach by introducing social disclosure as a new empirical dimension to the literatures of banking efficiency analysis using DEA.
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Muhammad Nouman, Muhammad Fahad Siddiqi, Karim Ullah and Shafiullah Jan
This paper aims to conceptualize the nexus between the participatory finance and the higher ethical objectives within the Islamic moral economy, also termed as Maqasid al Shari’ah.
Abstract
Purpose
This paper aims to conceptualize the nexus between the participatory finance and the higher ethical objectives within the Islamic moral economy, also termed as Maqasid al Shari’ah.
Design/methodology/approach
Insights from the extant Islamic economics and finance literature are integrated through an interpretative systematic review using the principles from critical interpretative synthesis (CIS).
Findings
A coherent framework is synthesized comprising the typology of the Maqasid al Shari’ah, the axioms of participatory finance and their nexus which is formulated by theorizing the common thread of meaning through the axioms of participatory finance and Maqasid al Shari’ah at the interpretative level. This framework postulates that the participatory finance fits well in the ethos and the value system of Islam. Moreover, “social well-being” invariably provides the nexus between the Maqasid al Shari’ah and participatory finance.
Originality/value
This study contributes to the Islamic economics and finance literature by integrating the dissenting views from the divergent literature related to the basic philosophy of Shari’ah and participatory finance and provides grounds for policy implications, particularly, for designing the financial products. Moreover, it demonstrates an application of interpretative systematic review in Islamic banking and finance research.
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The purpose of this paper is to present an analysis of current practices of Islamic mortgages in the light of the principles of Islamic financial system, to document divergences �…
Abstract
Purpose
The purpose of this paper is to present an analysis of current practices of Islamic mortgages in the light of the principles of Islamic financial system, to document divergences – if any. A subsidiary goal is to develop an Islamic Mortgage Model (IMM) based on Musharakah principles.
Design/methodology/approach
The author documents theoretical underpinnings of risk-return sharing from the Shari’ah perspective. A comparative study of conventional and Islamic mortgages is completed; existing practice of Islamic mortgages analyzed in the light of Musharakah principles and divergences identified. IMM is developed after taking divergences and Musharakah principles into considerations. A housing case is used to highlight differences (in financial terms) under multiple methods and scenarios.
Findings
Study documents multiple divergences from Musharakah principles in the existing practice of Islamic mortgages including ignorance of market pricing in the negotiation of rentals and trading of equity units, and transfer of all ownership risks and rewards (vacancy, damage, destruction and market) to one partner (i.e. customer). Practice is divergent from principles in the area of economic substance. Modified IMM is developed by taking into account Musharakah principles; and differences highlighted by calculating financial figures – to determine financial rights and liabilities of the parties.
Practical implications
Divergence from the principles of risk-return sharing leads to failure in the achievement of Islamic finance objective of equitable distribution of wealth. Moreover, protection of capital for financier reduces the market abilities to achieve financial stability by matching credit expansion with the rise in the real economy. Shari’ah boards and regulators, as well as, management of Islamic banking industry are expected to incorporate proposed changes in-practice for the realization of Islamic finance objectives.
Originality/value
This study contributes to Islamic finance literature in the area of risk-return sharing. Based on important objectives of Islamic finance – equitable distribution of wealth and financial stability – divergences identified and a modified IMM in the light of Musharakah principles is presented. Descriptive rules are transformed into financial figures to document financial rights and liabilities of the concerned parties.
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Izra Berakon, Amin Wibowo, Nurul Indarti, Nor Nabilla Muhammad and Rizaldi Yusfiarto
The purpose of this study is to examine the effect of the efficiency model on firms performance. The authors also strive to test the compatibility of the efficiency models of…
Abstract
Purpose
The purpose of this study is to examine the effect of the efficiency model on firms performance. The authors also strive to test the compatibility of the efficiency models of Sharia and non-Sharia manufacturing firms.
Design/methodology/approach
The samples are manufacturing industry firms listed on the Indonesia Stock Exchange from 2013 to 2021. This study used 68 firms, with details of 34 Sharia while the remaining 34 were non-Sharia. The data were analyzed using generalized least square (GLS) to test the entire formulated hypothesis. Moreover, current research provides robustness tests to gain more valid and reliable results.
Findings
The results demonstrated that cost efficiency (CE), human capital efficiency (HCE) and capital intensity (CI) affect the firm’s performance. The efficiency model is more appropriate to be applied to the manufacturing Sharia firms in Indonesia. The results are robust even though the feasible GLS and panel-corrected standards errors models are added and a split sample is applied based on certain firm characteristics.
Practical implications
This research can bridge the theory and practice that exist in companies. The authors proposed an efficiency model that can maximize firm performance profits. Moreover, it turns out that the efficiency model is more relevant to be applied to Sharia firms in Indonesia. Furthermore, the research findings have several implications notably for theoretical development, global enterprises and practitioners.
Originality/value
This study expands the literature and discussion about the efficiency model by formulating and investigating CE, HCE and CI on the firm performance which previous studies have rarely elaborated on and tested. In addition, the authors divided the sample into two groups (Sharia and non-Sharia firms) to ensure the compatibility of the implementation of the efficiency model on firm performance.
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Mohamed Moshreh Ali Ahmed, Dina Kamal Abd El Salam Ali Hassan and Nourhan Hesham Ahmed Magar
The purpose of this paper is to investigate whether audit committee characteristics, in particular audit committee size, audit committee activity and audit committee gender…
Abstract
Purpose
The purpose of this paper is to investigate whether audit committee characteristics, in particular audit committee size, audit committee activity and audit committee gender diversity, are associated with financial performance in Egyptian banks. The second purpose of this paper is to explore the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance.
Design/methodology/approach
A multiple regression analysis is used to estimate the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance of a sample of Egyptian banks during the period between 2018 and 2022.
Findings
The results indicate that audit committee size has a negative and insignificant effect impact on return on assets (ROA) and return on equity (ROE), respectively. The results also indicate that the audit committee gender diversity has a significant positive impact on ROA and ROE, respectively. Regarding audit committee activity, the number of board meetings has a negative and insignificant effect on ROA and ROE, respectively. Regarding gender diversity as a moderating variable, in general there is a positive effect of gender diversity on the relationship between audit committee characteristics and financial performance.
Research limitations/implications
The study was limited to 20 banks in one country, but it sets the tone for future empirical research on this subject matter. The study also relied on one moderating variable, which is board gender diversity. This study provides an avenue for future research in the area of corporate governance and financial performance in other emerging countries, especially other African countries.
Practical implications
This study provides useful insights for managers and policymakers to better understand which audit committee characteristics can best encourage a company to improve financial performance. Furthermore, regulators should ensure that banks strictly adhere to corporate governance principles to build a strong banking industry capable of achieving economic development.
Social implications
Banks will benefit equally from valuable qualities across demographic groupings in society by having females on the audit committee and appropriate audit committee meetings. Additionally, if audit committee members are correctly selected, banks with more females in audit committee and suitable audit committee meetings can successfully contribute to strengthening financial performance and social welfare of diverse segments of society. A culture of good banking governance must emerge to improve bank financial stability and, as a result, greater stability and economic growth.
Originality/value
To the best of the authors’ knowledge, the study is, perhaps, the first to examine the moderating role of board gender diversity on the relationship between audit committee characteristics and financial performance in Egyptian banks. This study adds to the literature by investigating such an issue in a developing economy that operates in a different context than those in developed countries.
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Charilaos Mertzanis, Haitham Nobanee, Mohamed A.K. Basuony and Ehab K.A. Mohamed
This study aims to analyze the impact of corporate governance on firms’ external financing decisions in the Middle East and North Africa (MENA) region.
Abstract
Purpose
This study aims to analyze the impact of corporate governance on firms’ external financing decisions in the Middle East and North Africa (MENA) region.
Design/methodology/approach
The authors analyzed a unique set of panel data comprising 2,425 nonfinancial firms whose shares are traded on stock exchanges in countries in the MENA region. The authors fitted an ordinary least squares model to estimate the regression coefficients. The authors performed a sensitivity analysis using alternative measures of the critical variables and an endogeneity analysis using instrumental variable methods with plausible external instruments.
Findings
The results revealed that corporate governance characteristics of firms are strongly associated with their degree of leverage. They also showed that macrofinancial conditions, financial regulations, corporate governance enforcement and social conditions mitigate the impact of corporate governance on firms’ financing decisions.
Research limitations/implications
A larger sample size will further improve the results; however, this is difficult and depends on the extent to which increasing disclosure practices allow more corporate information to reach international databases.
Practical implications
This study provides new evidence on the role of corporate governance on firms’ financing decisions and documents the essential mitigating role of institutions, alerting managers to consider them.
Originality/value
This study is a novel attempt. Based on information from different data sources, this study explored the predictive power of corporate governance, ownership structures and other firm-specific characteristics in explaining corporate leverage in MENA countries. Overall, the analysis provides new evidence of the association between corporate governance and capital structure in the MENA region, highlighting the critical role of institutions.
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Manaf Al-Okaily, Helmi Boshnak, Hani Alkayed, Esam Shehadeh and Mohammad Alqam
This study aims to explore the role of eXtensible Business Reporting Language (XBRL) adoption in improving financial statements transparency in the Jordanian context.
Abstract
Purpose
This study aims to explore the role of eXtensible Business Reporting Language (XBRL) adoption in improving financial statements transparency in the Jordanian context.
Design/methodology/approach
The partial least squares structural equation modeling approach was used to analyze the obtained data.
Findings
The empirical outcomes indicated that the adoption of XBRL contributes to improving financial statements transparency in listed Jordanian firms in the Amman Stock Exchange, whereas information technology (IT) infrastructure was found to moderate the relationship between XBRL adoption and improving financial statements transparency and hence the related hypotheses were accepted.
Originality/value
This study encouraged the importance of shifting to the adoption of the XBRL which will contribute to improving transparency of financial data and information in listed Jordanian firms and then support the process of decision-making.
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Essia Ries Ahmed, Md Aminul Islam, Tariq Tawfeeq Yousif Alabdullah and Azlan Bin Amran
This paper aims to investigate the influence of the determinants (pricing, type of structure, Shariah auditing, Shariah risk and Shariah documentation) and the sukuk legitimacy…
Abstract
Purpose
This paper aims to investigate the influence of the determinants (pricing, type of structure, Shariah auditing, Shariah risk and Shariah documentation) and the sukuk legitimacy among Islamic financial institutions using a qualitative approach. The paper further explained the significance of the determinants on legitimacy, evaluated the relationship between sukuk characteristics and sukuk legitimacy and examined the moderating effect of Shariah Supervisory Board (SSB) on the relationship.
Design/methodology/approach
The study used a purposive sampling technique to select the target respondents required for the survey (semi-structured interview). This technique is applied by selecting members of SSBs among Islamic financial institutions. A total number of ten members are selected as the sample size for the study based on their experience and basic knowledge of Fiqh Al-Mua’malat and its application in Islamic financial institutions.
Findings
The findings revealed that the determinants have a significant impact on the sukuk legitimacy, meaning that there is a positive and significant relationship between the determinants and the sukuk legitimacy. In addition, this study indicates the empirical evidence of the moderating effect of SSB on the relationship between the determinants and the sukuk legitimacy.
Practical implications
This study has added to the literature by examining the determinants of sukuk legitimacy while evaluating the moderating effect of SSB on the relationship. Besides, this might add benefits to the numerous Islamic financial institutions relating to the amendment of its regulatory frameworks with the view to pushing the sukuk market investors to move toward asset-backed structure. In addition, the SSB in central banks must also focus its attention regarding the sukuk legitimacy and its application among the various Islamic financial institutions.
Originality/value
This study has added a new discussion to the body of knowledge, i.e. examining the sukuk legitimacy and its relationship with sukuk determinants; hence, an approach that is not widely discussed in the previous studies. Furthermore, conducting such research in the field of Islamic finance provides novelty in the literature among both emerging and developed economies including Malaysia. This is because to the best knowledge of the researchers, there was no empirical study (within the literature) that combined these variables and evaluated their empirical significance. Accordingly, this would enlighten the Islamic Ummah and propel the society’s intensity toward contributing to knowledge and might further provide clarification on the determinants and the sukuk legitimacy to prospective scholars, precisely on the moderating effect of SSB on the relationship between determinants and legitimacy of sukuk.