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).
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.
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.
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.
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.
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.
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
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