Corporate Ethical Identity and Earnings Quality: Evidence from Islamic Banks in Qismut+3 Countries
DOI:
https://doi.org/10.26740/akunesa.v14n03.p248-256Keywords:
Earnings; Ethical; Identity; Islamic; QISMUT+3Abstract
This study examines the effect of corporate ethical identity on earnings quality in Islamic banks. Islamic banks apply Islamic principles that underlie corporate ethical identity and should avoid earnings management to maintain high-quality earnings. Prior studies examine corporate ethical identity and firm performance, as well as earnings management or earnings quality in conventional and Islamic banks. Unlike prior studies, this paper examines the association between corporate ethical identity and earnings quality among Islamic banks in an international context. The Ethical Identity Index (EII) and earnings predictability are employed to assess the effect of corporate ethical identity on earnings quality in Islamic banks. Using the OLS regression, this study analyzes 125 firm-year observations from 8 countries that incorporated in QISMUT+3 countries over the period 2013-2017. The results indicate that corporate ethical identity is positively associated with earnings quality in Islamic banks. This study also finds variation between communicated and ideal ethical identities across 25 Islamic banks in QISMUT+3 countries. These results imply that Islamic banks' management and regulators should pay greater attention to Islamic banks' corporate ethical identity, as this is an important variable that influences earnings quality.
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