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The Qualitative Characteristics of Accounting Information, Earnings Quality, and Islamic Banking Performance: Evidence from the Gulf Banking Sector

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  • Ibrahim Elsiddig Ahmed

    (Department of Accounting, College of Business Administration, Ajman University, Ajman 346, UAE)

Abstract

The study aims to operationalize financial reporting quality in terms of the qualitative characteristics (QCs) as stated by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) standards, as well as to investigate their association with earnings quality (EQ) and banking performance. The study uses secondary data extracted from DataStream to operationalize and measure the financial reporting quality in the annual reports of 25 out of the 27 Islamic banks in the Gulf Council Countries (GCC) for a 5-year period (2014–2018), meaning 125 annual reports were used. The study applies a manual content analysis to the annual reports to score all the items of QCs and operationalizes 25 measurement items that represent the six QCs. All items use 5-point Likert-type scales to compute the sub-score and the overall index through the Neural Network System. The findings of the model paths show a significant positive relationship between EQ and most of the QCs. The first hypothesis is partially accepted as there is a positive relationship between EQ and relevancy, reliability, prudence and general quality; however, there is no significant relationship between EQ and understandability and there is a significant negative relationship between EQ and comparability. Moreover, the study finds a significant positive relationship between EQ and ROA on one hand and EQ and ROE on the other hand ( p -value = 0.00), meaning the second hypothesis is supported.

Suggested Citation

  • Ibrahim Elsiddig Ahmed, 2020. "The Qualitative Characteristics of Accounting Information, Earnings Quality, and Islamic Banking Performance: Evidence from the Gulf Banking Sector," IJFS, MDPI, vol. 8(2), pages 1-16, May.
    • Handle: RePEc:gam:jijfss:v:8:y:2020:i:2:p:30-:d:360013
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    Cited by:

    1. Alzhara Humaid Alsulmani & Sheikha Saif Alkindi & Essia Ries Ahmed, 2021. "Customer Accounting Information and Omani Service Companies’ Performance," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(2), pages 79-88, April.
    2. Ibtihal A. Abed & Nazimah Hussin & Mostafa A. Ali & Hossam Haddad & Maha Shehadeh & Elina F. Hasan, 2022. "Creative Accounting Determinants and Financial Reporting Quality: Systematic Literature Review," Risks, MDPI, vol. 10(4), pages 1-25, April.

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    More about this item

    Keywords

    qualitative characteristics; earnings quality; AAOIFI conceptual framework; Islamic banking performance; M40; N25;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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