Characteristics of banks as determinants of profit management for Islamic and conventional banks in ASEAN

Abstract

This study aims to analyze company characteristics as a determinant of conventional and Islamic bank earnings management in several ASEAN countries (Association of South East Asian Nations). The Multiple Discriminant Analysis was applied to determine the differences between Islamic and Conventional Banks. This test was conducted based on Capital Adequacy Ratio, Income Before Tax and Interest, Non-Performing and Changing Loans, and Company's Size in the banks of Indonesia, Malaysia, and Brunei Darussalam from 2014 to 2018. The data obtained from 200 banking entities were analyzed discriminatively. The results showed that there were simultaneous differences between Capital Adequacy Ratio, Earnings Before Tax, Loan Loss Provision, Non-Performing and Changing Loans, and Company's Size as determinants of earnings management between Islamic and conventional banks. Also, it was found that Company's Size was the dominant variable determining the management differences. Based on Discriminant Analysis, there were significant differences in the determinants of conventional and Islamic earnings management. The Changing Loan variable showed the highest contribution in determining earnings management in Islamic banks. Overall, this study found that conventional banks dominated Islamic system in practicing earnings management.

Can Shari’ah supervisory board and Islamic bank characteristics reduce tax avoidance? Evidence in Indonesia and Malaysia

“…Research conducted in the past focused on explaining that Islamic banks break Shari'ah compliance principles by engaging in unethical practices like income smoothing (Boulila Taktak et al, 2010;Ozili and Outa, 2017;Pramono et al, 2019;Shawtari et al, 2015;Taktak, 2011), loan loss provisions (Ashraf et al, 2015;Farook et al, 2014;Noor and Mohamed, 2019;Soedarmono et al, 2017;Zulfikar and Sri, 2019), earning management (Abdelsalam et al, 2016;El-Halaby et al, 2020;Kolsi and Grassa, 2017;Lassoued et al, 2018;Othman and Mersni, 2014;Suripto and Supriyanto, 2021;Zainuldin and Lui, 2021;Quttainah et al, 2013) and profit equalization reserve (Noor and Mohamed, 2019), rate of return (Zainol and Kassim, 2012), Islamic accounting conservativism (Almutairi and Quttainah, 2019) and deposit rate of mudharabah (Latiff and Halid, 2012). Furthermore, this study contributes to filling two gaps.…”

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“…Through religious culture, learners are expected to be independent in improving noble moral values (Subhi, 2017). Awareness of the importance of spiritual life for the Indonesian nation is realized in the provision of materials from start to college (Suripto & Supriyanto, 2021).…”

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