Islamic Business Ethics Disclosure and Earnings Management – Evidence from Islamic Banks in Indonesia
DOI:
https://doi.org/10.31436/jif.v8i2.337Keywords:
Corporate Governance, Islamic Business Ethics, Temporary Syirkah Fund, Earnings ManagementAbstract
This research is conducted to prove empirically the influence of Islamic business ethics disclosure, corporate governance, debt ratio, syirkah fund ratio and the profile of the Shariah Supervisory Board (SSB) towards earnings management. The samples are collected from Islamic commercial banks in Indonesia. Multiple regression analyses are employed in analyzing the data. From this research, it is found that (i) corporate governance, (ii) temporary syirkah funds, (iii) the size and educational level of the SSB, (iv) the syirkah fund ratio, and (v) the Islamic Ethics Disclosure Index or IEDI have negative impacts towards earnings management. The debt ratio, educational background of the members of SSB, and double membership of SSB do not have an impact on earnings management. Thus, the SSB should oversee the implementation of Islamic business ethics and avoid earnings management. Earnings management creates a false view of the performance of the Islamic bank, with respect to its profit and loss sharing system.
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References
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Farook, S., Hassan, M. K., & Lanis, R. (2011). Determinants of Corporate Social Responsibility Disclosure : the Case of Islamic Banks. Journal of Islamic Accounting and Business Research, 2(2), 114–141. https://doi.org/10.1108/17590811111170539
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Hamdi, F. M., & Zarai, M. A. (2014). Corporate Governance Practices and Earnings Management in Islamic Banking Institutions. Research Journal of Finance and Accounting, 5(9), 81–97.
Hamid, A. A. (2011). Corporate Governance Theories- Stewardship theory. Retrieved from http://ari-glcrc.blogspot.co.id/2011/12/corporate-governance-theories_07.html
Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic Banks via communication in annual reports. Journal of Business Ethics, 76(1), 97–116. https://doi.org/10.1007/s10551-006-9272-5
Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its. Accounting Horizons, 13(4), 365–383. https://doi.org/10.2308/acch.1999.13.4.365
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Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360.
Jo, H., & Kim, Y. (2008). Ethics and Disclosure : A Study of the Financial Performance of Firms in the Seasoned Equity Offerings Market. Journal of Business Ethics, 80, 855–856. https://doi.org/10.1007/s10551-007-9473-6
Kaplan, S. E. (2001). Further Evidence on the Ethics of Managing Earnings: an Examination of the Ethically Related Judgments of Shareholders and Non-shareholders. Journal of Accounting and Public, 20(1), 27–44.
Kasim, N., NuHtay, heila N., & Salman, S. A. (2013). Comparative Analysis on AAOIFI, IFSB and BNM Shari’ah Governance Guidelines. International Journal of Business and Social Science, 4(15), 220–227.
Merchant, K. A., & Rockness, J. (1994). The Ethics of Managing Earnings : An Empirical Investigation. Journal of Accounting and Policy, 94, 79–94.
Mersni, H., & Othman, H. Ben. (2016). The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region. Journal of Islamic Accounting and Business Research, 7(4), 318–348. https://doi.org/10.1108/JIABR-11-2014-0039
Mohamed, F., Mohamed, H., & Zarai, A. (2013). Perspectives of Earnings Management In Islamic Banking Institutions. International Journal of Business and Management Invention, 2(9), 26–38.
Nasev, J., Black, B., & Kim, W. (2012). Does Corporate Governance Affect Earnings Management? Evidence from an Exogenous Shock to Governance in Korea. Law and Econ Research Paper.
Neffati, A., Fred, I. Ben, & Schalck, C. (2011). Earnings Management , Risk And Corporate Governance In Us Companies. Corporate Ownership & Control, 8(2), 170–176.
Nejad, H. A., Abdollahi, A., & Kabiri, N. (2012). The Impact Of Financial Leverage Sharp Increase On Earnings Management On The Accepted Firms In Tehran Stock Exchange. International Journal of Innovation and Applied Studies, 1(1), 94–104.
Normala, S., Obid, S., & Demikha, L. (2011). Earnings Management : Islamic Perspective. Asia Pacific Journal of Accounting and Finance, 2(December), 77–89.
Obid, S. N. S., & Demikha, L. (2012). Structural Framework of Islamic Aqidah on the Practice of Earning Management. Journal of Middle Eastern and Islamic Studies (in Asia), 6(4), 51–71.
Padmantyo, S. (2010). Analisis Manajemen Laba Pada Laporan Keuangan Perbankan Syariah (Studi pada Bank Syariah Mandiri dan Bank Muamalat Indonesia). Benefit Jurnal Manajemen Dan Bisnis, 14(2), 53–65.
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Pepper, A., & Gore, J. (2012). Behavioral Agency Theory: New Foundations for Theorizing About Executive Compensation. Journal of Management (In Press), 41(4), 1045–1068. https://doi.org/10.1177/0149206312461054
Press, I. S., Valipour, H., & Moradbeygi, M. (2011). Corporate Debt Financing and Earnings Quality. Corporate Debt Financing and Earnings Quality, 1(3), 139–157.
Quttainah, M. A., Song, L., & Wu, Q. (2011). Do Islamic Banks Employ Less Earnings Management? In Politics and Economic Development (pp. 1–52). Turkey.
Rachmawati, S. (2010). Asimetri Informasi Memoderasi Beban Pajak Tangguhan dan Manajemen Laba. Jurnal Informasi, Perpajakan, Akuntansi Dan Keuangan Publik, 5(1), 41–55.
Rahman, R. A., Danbatta, B. L., & Saimi, N. S. B. (2014). Corporate Ethical Identity Disclosures : The Perceived , the Publicized and the Applied in Islamic Banks. International Journal of Trade, Economics and Finance, 5(2), 199–204. https://doi.org/10.7763/IJTEF.2014.V5.371
Rahman, U. M. A., Dowds, J., & Cahan, S. F. (2005). Earnings Management Practices Among Muslim And Non-Muslim Managers in Malaysia. IIUM Journal of Economics and Management, 2(2), 189–208.
Rahmani, S., & Akbari, M. A. (2013). Impact of Firm Size and Capital Structure on Earnings Management : Evidence from Iran. World of Sciences Journal, 1(17), 59–71.
Rastgoo, N., Zanjirdar, M., & Vakilifard, H. (2013). Relationship between Debt Policy and Earning Management of Listed Companies in the Stock Exchange of Tehran. Reef Resources Assessment and Management Technical Paper, 38(2), 316–325.
Romano, M., & Onesti, T. (2016). Earnings quality in an ethics perspective. International Journal Business Governance and Ethics, 11(1), 52–67.
Shah, S. Z. A., Butt, S. A., & Hasan, A. (2009). Corporate Governance and Earnings Management an Empirical Evidence Form Pakistani Listed Companies. European Journal of Scientific Research, 26(4), 624–638.
Slyke, D. M. Van. (2006). Agents or Stewards: Using Theory to Understand the Government-Nonprofit Social Service Contracting Relationship. Journal of Public Administration Research and Theory, 17(2), 157–187. https://doi.org/10.1093/jopart/mul012
Sugiri, S. (1998). Earnings Management: Teori, Model, dan Bukti Empiris. Telaah Bisnis, 3, 1–18.
Sutami, W. (2012). Analisis Manajemen Laba (Earning Management) Terhadap Penyajian Laporan Keuangan Perusahaan Publik (Study Empiris Terhadap Perusahaan Manufaktur di BEI Periode 2007-2009). Universitas Islam 45 Bekasi.
Syafii, M., Sanrego, Y. D., & Taufiq, M. (2012). An Analysis of Islamic Banking Performance : Maqashid Index Implementation in Indonesia and Jordania. Journal of Islamic Finance, 1(1), 12–29.
Taktak, N. B., Zouri, S. B. S., & Boudriga, A. (2011). Do Islamic banks use loan loss provisions to smooth their results? Journal of Islamic Accounting and Business Research, 2(2), 142–152.
Utami, D. A. (2010). Analisis Komparatif Kecenderungan Manajemen Laba Pada Bank Syariah, Bank Konvensional yang Mepunyai Unit Usaha Syariah dan Bank Konvensional. Airlangga University.
Zaki, A., Sholihin, M., & Barokah, Z. (2014). The association of Islamic bank ethical identity and financial performance : evidence from Asia. Asian Journal Business Ethics, 3(01), 97–110. https://doi.org/10.1007/s13520-014-0034-7
Ardison, K. M. M., Martinez;, A. L., & Galdi, F. C. (2012). The Effect of Leverage on Earnings Management in Brazil. Advanve in Scientific and Applied Accounting, 5(3), 305–324.
Bacha, O. I. (1997). Adapting Mudarabah Financing to Contemporary Realities: A Proposed Financing Structure. The Journal of Accounting, Commerce & Finance, 1(1), 26–54.
Choudhury, M. A., & Alam, M. N. (2013). Corporate Governance in Islamic Perspective. International Journal of Islamic and Middle Eastern Finance and Management, 6(3), 180–199. https://doi.org/10.1108/IMEFM-10-2012-0101
Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns. Australian Journal of Management, 16(1), 49–64. https://doi.org/10.1177/031289629101600103
Faradila, A., & Cahyati, A. D. (2013). Analisis manajemen laba pada perbankan syariah. Jurnal Riset Akuntansi & Komputerisasi, 4(1), 57–74.
Farook, S., Hassan, M. K., & Lanis, R. (2011). Determinants of Corporate Social Responsibility Disclosure : the Case of Islamic Banks. Journal of Islamic Accounting and Business Research, 2(2), 114–141. https://doi.org/10.1108/17590811111170539
Farooq, O., & Chetioui, Y. (2012). Corporate governance and stock price performance of firms during the crisis : evidence from the MENA region Youssef Chetioui. International Journal Business Governance and Ethics, 7(4), 331–349.
Ghodrati, H., Mehrmanesh, H., & Fini, S. R. G. (2013). Management Science Letters. Management Science Letters, 3, 1757–1766. https://doi.org/10.5267/j.msl.2013.05.006
Hamdi, F. M., & Zarai, M. A. (2014). Corporate Governance Practices and Earnings Management in Islamic Banking Institutions. Research Journal of Finance and Accounting, 5(9), 81–97.
Hamid, A. A. (2011). Corporate Governance Theories- Stewardship theory. Retrieved from http://ari-glcrc.blogspot.co.id/2011/12/corporate-governance-theories_07.html
Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic Banks via communication in annual reports. Journal of Business Ethics, 76(1), 97–116. https://doi.org/10.1007/s10551-006-9272-5
Healy, P. M., & Wahlen, J. M. (1999). A Review of the Earnings Management Literature and Its. Accounting Horizons, 13(4), 365–383. https://doi.org/10.2308/acch.1999.13.4.365
Indrawaty, & Wardayanti, S. M. (2016). Implementing Islamic Corporate Governance (ICG) and Islamic Social Reporting in Islamic Financial Institution (IFI). Procedia - Social and Behavioral Sciences, 219, 338–343. https://doi.org/10.1016/j.sbspro.2016.04.042
Institute-of-Indonesia-Chartered-Accountant. (2017). Standar Akuntansi Keuangan Syariah (Per 1 Janu). Jakarta: Grha IAI.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305–360.
Jo, H., & Kim, Y. (2008). Ethics and Disclosure : A Study of the Financial Performance of Firms in the Seasoned Equity Offerings Market. Journal of Business Ethics, 80, 855–856. https://doi.org/10.1007/s10551-007-9473-6
Kaplan, S. E. (2001). Further Evidence on the Ethics of Managing Earnings: an Examination of the Ethically Related Judgments of Shareholders and Non-shareholders. Journal of Accounting and Public, 20(1), 27–44.
Kasim, N., NuHtay, heila N., & Salman, S. A. (2013). Comparative Analysis on AAOIFI, IFSB and BNM Shari’ah Governance Guidelines. International Journal of Business and Social Science, 4(15), 220–227.
Merchant, K. A., & Rockness, J. (1994). The Ethics of Managing Earnings : An Empirical Investigation. Journal of Accounting and Policy, 94, 79–94.
Mersni, H., & Othman, H. Ben. (2016). The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region. Journal of Islamic Accounting and Business Research, 7(4), 318–348. https://doi.org/10.1108/JIABR-11-2014-0039
Mohamed, F., Mohamed, H., & Zarai, A. (2013). Perspectives of Earnings Management In Islamic Banking Institutions. International Journal of Business and Management Invention, 2(9), 26–38.
Nasev, J., Black, B., & Kim, W. (2012). Does Corporate Governance Affect Earnings Management? Evidence from an Exogenous Shock to Governance in Korea. Law and Econ Research Paper.
Neffati, A., Fred, I. Ben, & Schalck, C. (2011). Earnings Management , Risk And Corporate Governance In Us Companies. Corporate Ownership & Control, 8(2), 170–176.
Nejad, H. A., Abdollahi, A., & Kabiri, N. (2012). The Impact Of Financial Leverage Sharp Increase On Earnings Management On The Accepted Firms In Tehran Stock Exchange. International Journal of Innovation and Applied Studies, 1(1), 94–104.
Normala, S., Obid, S., & Demikha, L. (2011). Earnings Management : Islamic Perspective. Asia Pacific Journal of Accounting and Finance, 2(December), 77–89.
Obid, S. N. S., & Demikha, L. (2012). Structural Framework of Islamic Aqidah on the Practice of Earning Management. Journal of Middle Eastern and Islamic Studies (in Asia), 6(4), 51–71.
Padmantyo, S. (2010). Analisis Manajemen Laba Pada Laporan Keuangan Perbankan Syariah (Studi pada Bank Syariah Mandiri dan Bank Muamalat Indonesia). Benefit Jurnal Manajemen Dan Bisnis, 14(2), 53–65.
Paredes, A. A. P., & Wheatley, C. (2017). The Influence of Culture on Real Earnings Management The Influence of Culture on Real Earnings Management. International Journal of Emerging Markets, 12(1), 38–57. https://doi.org/10.1108/IJoEM-12-2014-0218
Pepper, A., & Gore, J. (2012). Behavioral Agency Theory: New Foundations for Theorizing About Executive Compensation. Journal of Management (In Press), 41(4), 1045–1068. https://doi.org/10.1177/0149206312461054
Press, I. S., Valipour, H., & Moradbeygi, M. (2011). Corporate Debt Financing and Earnings Quality. Corporate Debt Financing and Earnings Quality, 1(3), 139–157.
Quttainah, M. A., Song, L., & Wu, Q. (2011). Do Islamic Banks Employ Less Earnings Management? In Politics and Economic Development (pp. 1–52). Turkey.
Rachmawati, S. (2010). Asimetri Informasi Memoderasi Beban Pajak Tangguhan dan Manajemen Laba. Jurnal Informasi, Perpajakan, Akuntansi Dan Keuangan Publik, 5(1), 41–55.
Rahman, R. A., Danbatta, B. L., & Saimi, N. S. B. (2014). Corporate Ethical Identity Disclosures : The Perceived , the Publicized and the Applied in Islamic Banks. International Journal of Trade, Economics and Finance, 5(2), 199–204. https://doi.org/10.7763/IJTEF.2014.V5.371
Rahman, U. M. A., Dowds, J., & Cahan, S. F. (2005). Earnings Management Practices Among Muslim And Non-Muslim Managers in Malaysia. IIUM Journal of Economics and Management, 2(2), 189–208.
Rahmani, S., & Akbari, M. A. (2013). Impact of Firm Size and Capital Structure on Earnings Management : Evidence from Iran. World of Sciences Journal, 1(17), 59–71.
Rastgoo, N., Zanjirdar, M., & Vakilifard, H. (2013). Relationship between Debt Policy and Earning Management of Listed Companies in the Stock Exchange of Tehran. Reef Resources Assessment and Management Technical Paper, 38(2), 316–325.
Romano, M., & Onesti, T. (2016). Earnings quality in an ethics perspective. International Journal Business Governance and Ethics, 11(1), 52–67.
Shah, S. Z. A., Butt, S. A., & Hasan, A. (2009). Corporate Governance and Earnings Management an Empirical Evidence Form Pakistani Listed Companies. European Journal of Scientific Research, 26(4), 624–638.
Slyke, D. M. Van. (2006). Agents or Stewards: Using Theory to Understand the Government-Nonprofit Social Service Contracting Relationship. Journal of Public Administration Research and Theory, 17(2), 157–187. https://doi.org/10.1093/jopart/mul012
Sugiri, S. (1998). Earnings Management: Teori, Model, dan Bukti Empiris. Telaah Bisnis, 3, 1–18.
Sutami, W. (2012). Analisis Manajemen Laba (Earning Management) Terhadap Penyajian Laporan Keuangan Perusahaan Publik (Study Empiris Terhadap Perusahaan Manufaktur di BEI Periode 2007-2009). Universitas Islam 45 Bekasi.
Syafii, M., Sanrego, Y. D., & Taufiq, M. (2012). An Analysis of Islamic Banking Performance : Maqashid Index Implementation in Indonesia and Jordania. Journal of Islamic Finance, 1(1), 12–29.
Taktak, N. B., Zouri, S. B. S., & Boudriga, A. (2011). Do Islamic banks use loan loss provisions to smooth their results? Journal of Islamic Accounting and Business Research, 2(2), 142–152.
Utami, D. A. (2010). Analisis Komparatif Kecenderungan Manajemen Laba Pada Bank Syariah, Bank Konvensional yang Mepunyai Unit Usaha Syariah dan Bank Konvensional. Airlangga University.
Zaki, A., Sholihin, M., & Barokah, Z. (2014). The association of Islamic bank ethical identity and financial performance : evidence from Asia. Asian Journal Business Ethics, 3(01), 97–110. https://doi.org/10.1007/s13520-014-0034-7
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Published
2019-11-28
How to Cite
Mukhibad, H., & Ahmad Nurkhin. (2019). Islamic Business Ethics Disclosure and Earnings Management – Evidence from Islamic Banks in Indonesia. Journal of Islamic Finance, 8(2), 31–42. https://doi.org/10.31436/jif.v8i2.337
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