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The impact of AAOIFI governance disclosure on Islamic banks performance

The impact of AAOIFI governance disclosure on Islamic banks performance This study aims to investigate the impact of the accounting and auditing organisation for Islamic financial institution (AAOIFI) governance disclosure on the performance of Islamic banks (IBs).Design/methodology/approachThe ordinary least squares regression model was used to test the impact of AAOIFI governance disclosure on the performance of 126 IBs from 8 countries that mandatorily adopt the AAOIFI standards for three years (2013–2015). In this regression model, return on asset (ROA) and return on equity (ROE) are the dependent variables, while AAOIFI governance disclosure is the independent variable. Corporate governance mechanisms, firm characteristics, year dummy and country dummy are used as control variables.FindingsThis paper found an insignificant relationship between AAOIFI governance disclosure and IBs performance.Research limitations/implicationsThis study highlighted the implication that the current research may help IBs and encourage them to disclose more information in annual reports, especially those related to AAOIFI governance standards because following good corporate governance leads to good financial performance. The major limitation of the paper is that it is only focussed on two measurements of bank performance – ROA and ROE; it would be good to use other firm performance measures, such as profit margin.Originality/valueThis study provides new empirical evidence on the impact of AAOIFI governance disclosure on IBs performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Reporting and Accounting Emerald Publishing

The impact of AAOIFI governance disclosure on Islamic banks performance

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References (130)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1985-2517
eISSN
1985-2517
DOI
10.1108/jfra-03-2020-0053
Publisher site
See Article on Publisher Site

Abstract

This study aims to investigate the impact of the accounting and auditing organisation for Islamic financial institution (AAOIFI) governance disclosure on the performance of Islamic banks (IBs).Design/methodology/approachThe ordinary least squares regression model was used to test the impact of AAOIFI governance disclosure on the performance of 126 IBs from 8 countries that mandatorily adopt the AAOIFI standards for three years (2013–2015). In this regression model, return on asset (ROA) and return on equity (ROE) are the dependent variables, while AAOIFI governance disclosure is the independent variable. Corporate governance mechanisms, firm characteristics, year dummy and country dummy are used as control variables.FindingsThis paper found an insignificant relationship between AAOIFI governance disclosure and IBs performance.Research limitations/implicationsThis study highlighted the implication that the current research may help IBs and encourage them to disclose more information in annual reports, especially those related to AAOIFI governance standards because following good corporate governance leads to good financial performance. The major limitation of the paper is that it is only focussed on two measurements of bank performance – ROA and ROE; it would be good to use other firm performance measures, such as profit margin.Originality/valueThis study provides new empirical evidence on the impact of AAOIFI governance disclosure on IBs performance.

Journal

Journal of Financial Reporting and AccountingEmerald Publishing

Published: Aug 11, 2021

Keywords: Islamic banks; AAOIFI governance; Islamic banks performance; Return on asset and return on equity

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