Earnings management around Islamic bonds issuance

Zairihan Abdul Halim, Suichen Xu and Norakma Abdul Majid

The Quarterly Review of Economics and Finance, 2020, vol. 77, issue C, 195-205

Abstract: We examine whether the religious values underlying Islamic bonds influence issuers’ financial reporting behavior. Using a sample of 1316 sukuk tranches issued by publicly listed firms in Malaysia from 2001 to 2014, we find sukuk issuers overstate their earnings in the year preceding sukuk offerings, and in the year subsequent to the offering. We also examine the influence of religious values associated with the parties involved in sukuk issuance on issuers’ earnings management. Our results show that a Muslim-dominated board is associated with less earnings management, supporting the idea of Islamic business ethics.

Keywords: Earnings management; Real activities manipulation; Sukuk; Securitization; Religious value (search for similar items in EconPapers)
JEL-codes: G32 M40 M41 Z12 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:77:y:2020:i:c:p:195-205

DOI: 10.1016/j.qref.2020.03.003

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