Islamic ethical values of corporate top leadership and real earnings management
Abstract
Purpose
This paper aims to study the roles of Muslim CEO, Muslim Chairman and Muslim board of directors in mitigating earnings management via real activities manipulation.
Design/methodology/approach
In total, 656 firm year-observations from 2007 to 2014 of Malaysian Top 100 firms listed on Bursa Malaysia is used to examine the relationship between real earnings management (REM) and the religious ethical values of Muslim top leadership of the firms.
Findings
The study provides evidence that there was no significant relationship between ethical values and REM measures among Muslim top corporate leaders. However, through additional analysis on sub-sample firms, this study finds that Muslim CEO and Muslim Chairman have a significant and negative association with proxies of REM: RCFO and RPC.
Research limitations/implications
The results show that Muslim CEO and Muslim Chairman are the actors that contribute more control in limiting REM especially in family-owned firms in Malaysia.
Originality/value
This is the first published paper that focuses on Islamic ethical values of corporate top leadership and REM in Malaysia, as previous studies have focused more on accruals earnings management.
Keywords
Acknowledgements
This paper acknowledges the research funding contributed by the Ministry of Higher Education (MOHE) through the ARI HICoE grant scheme.
Citation
Abdul Rahman, R., Hj Omar, N., Rahman, A. and Muda, R. (2018), "Islamic ethical values of corporate top leadership and real earnings management", International Journal of Law and Management, Vol. 60 No. 3, pp. 869-884. https://doi.org/10.1108/IJLMA-03-2017-0029
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited