An empirical investigation into the impact ofShari’ah-compliant status and Muslim directorship on the accuracy of IPO management earnings forecasts

Mohammed Abdullah Ammer and Abdulaziz Mohammed Alsahlawi

International Journal of Islamic and Middle Eastern Finance and Management, 2018, vol. 12, issue 1, 56-75

Abstract: Purpose - Islam stresses on the practice of transparency and sufficient disclosure particularly when it concerns the ethical identity of Islamic institutions. This is to make sure that the activities conducted in business adhere toShari’ahprinciples. The purpose of this paper is to examine the impact ofShari’ah-compliant status on the accuracy of initial public offering (IPO) earnings forecasts and to investigate the effect of the existence of Muslim directors on IPO companies’ board of directors on the accuracy of earnings forecasts. Design/methodology/approach - This study makes use of absolute forecast error as a proxy for earnings forecast accuracy. As obtained from the list ofShari’ah-compliant securities established by theShari’ahAdvisory Council of the Malaysian Securities Commission, the study sample comprised 190Shari’ah-compliant and non-compliant IPOs. The collected data were analyzed through univariate analysis and ordinary least squares regression. Findings - The initial findings show that during the study period, the earnings forecasts of Malaysian IPOs are accurate to some level, although such level is still unsatisfactory. The findings also showed thatShari’ah-compliant status and Muslim directorship do not positively affect the accuracy of IPO earnings forecasts. Practical implications - The findings of the study provide some implications for regulators, financial analysts, investors and users of financial statements, particularly those desirous of investing in Islamic capital market. Originality/value - The present study provides a new and far-reaching contribution into the debate about the earnings forecasts disclosure in the context of Islamic ethical perspective. In addition, this study is considered as the first study to extend IPO literature by examining the impact ofShari’ah-compliant status and Muslim directorship on the accuracy of management earnings forecasts disclosed in the IPO prospectus.

Keywords: Malaysia; IPOs; Shari’ah-compliant; Earnings forecasts accuracy; Muslim directors (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-07-2017-0174

DOI: 10.1108/IMEFM-07-2017-0174

Access Statistics for this article

International Journal of Islamic and Middle Eastern Finance and Management is currently edited by Prof M. Kabir Hassan

More articles in International Journal of Islamic and Middle Eastern Finance and Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().