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Comparing the value-relevance of AAOIFI versus IFRS accounting numbers in the Takaful industry

Mariem Mejri (Department of Accounting, Prince Sultan University, Riyadh, Saudi Arabia)
Hakim Ben Othman (ICN Business School, Université de Lorraine, CEREFIGE, Nancy, France)
Hussein A. Abdou (Faculty of Business and Justice, University of Central Lancashir, Preston, UK and Department of Management, Faculty of Commerce, Mansoura University, Mansoura, Egypt)
Khaled Hussainey (Department of Accounting, University of Portsmouth, Portsmouth, UK)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 19 December 2022

49

Abstract

Purpose

This study aims to compare the value relevance of accounting numbers prepared under the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards with those produced under the International Financial Reporting Standards (IFRS) for Takaful companies (TC).

Design/methodology/approach

The authors assess the value relevance of accounting numbers using the Easton and Harris (1991) and Ohlson (1995) return and price models. They also use 54 insurance companies from 10 developing countries in Asia and the Middle East from 2006 to 2015.

Findings

The analysis shows that book value is significantly related to stock price under AAOIFI and IFRS. It also shows that TC adopting AAOIFI accounting standards have a more significant effect on stock price. This suggests that AAOIFI standards are more value relevant than IFRS.

Practical implications

TC and their stakeholders can use the findings to determine which accounting standards (IFRS or AAOIFI) produce the more relevant accounting information. This study is useful for investors that consider Islamic ethical practices to make their investment decisions for the standards-setting bodies that focus on establishing accounting standards for the Takaful industry.

Originality/value

The authors investigate a new aspect of the topic of value relevance. To the best of the authors’ knowledge, they believe this is the first paper examining the value relevance of TC’ accounting information prepared under AAOIFI and IFRS.

Keywords

Acknowledgements

Declaration of interest statement: The authors declare that they have no significant competing financial, professional, or personal interests that might have influenced the performance or presentation of the work described in this manuscript.

Citation

Mejri, M., Ben Othman, H., Abdou, H.A. and Hussainey, K. (2022), "Comparing the value-relevance of AAOIFI versus IFRS accounting numbers in the Takaful industry", Journal of Islamic Accounting and Business Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-10-2020-0333

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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