Rights statement: This is the author’s version of a work that was accepted for publication in The International Journal of Accounting. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in The International Journal of Accounting, 53, 1, 2018 DOI: 10.1016/j.intacc.2018.02.002
Accepted author manuscript, 969 KB, PDF document
Available under license: CC BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License
Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Capital and Earnings Management
T2 - Evidence from Alternative Banking Business Models
AU - El Nahass, Marwa
AU - Izzeldin, Marwan
AU - Steele, Gerald Roy
N1 - This is the author’s version of a work that was accepted for publication in The International Journal of Accounting. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in The International Journal of Accounting, 53, 1, 2018 DOI: 10.1016/j.intacc.2018.02.002
PY - 2018/3
Y1 - 2018/3
N2 - This paper examines whether institutional characteristics distinguishing Islamic from conventional banks lead to distinctive capital and earnings management behavior through the use of loan loss provisions. In our sample countries, the two banking sectors operate under different regulatory frameworks: conventional banks currently apply the “incurred” loan loss model until 2018 whereas Islamic banks mandatorily adopt an “expected” loan loss model. Our results provide significant evidence of capital and earnings management practices via loan loss provisions in conventional banks. This finding is more prominent for large and loss-generating banks. By contrast, Islamic banks tend not to use loan loss provisions in either capital or earnings management, irrespective of the bank's size, earnings profile, or the structure of their loan loss model. This difference may be attributed to the constrained business model of Islamic banking, strict governance, and ethical orientation.
AB - This paper examines whether institutional characteristics distinguishing Islamic from conventional banks lead to distinctive capital and earnings management behavior through the use of loan loss provisions. In our sample countries, the two banking sectors operate under different regulatory frameworks: conventional banks currently apply the “incurred” loan loss model until 2018 whereas Islamic banks mandatorily adopt an “expected” loan loss model. Our results provide significant evidence of capital and earnings management practices via loan loss provisions in conventional banks. This finding is more prominent for large and loss-generating banks. By contrast, Islamic banks tend not to use loan loss provisions in either capital or earnings management, irrespective of the bank's size, earnings profile, or the structure of their loan loss model. This difference may be attributed to the constrained business model of Islamic banking, strict governance, and ethical orientation.
KW - IFRS
KW - Regulatory capital management
KW - Earnings management
KW - Expected loan losses
KW - Incurred loan losses
U2 - 10.1016/j.intacc.2018.02.002
DO - 10.1016/j.intacc.2018.02.002
M3 - Journal article
VL - 53
SP - 20
EP - 32
JO - The International Journal of Accounting
JF - The International Journal of Accounting
SN - 0020-7063
IS - 1
ER -