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Article
Publication date: 12 June 2017

Zayyad Abdul-Baki and Ahmad Bukola Uthman

This paper aims to argue that the current environment in which the Islamic banking system is situated is not ideal for the system’s pursuance of its socioeconomic ideals…

Abstract

Purpose

This paper aims to argue that the current environment in which the Islamic banking system is situated is not ideal for the system’s pursuance of its socioeconomic ideals, thus necessitating the system’s shift from pursuing falah to maximizing profits.

Design/methodology/approach

The paper theorizes and conceptualizes this shift from falah to profit maximization using two complementary theories – systems theory and institutional theory – to prove that such a shift is not unexpected. The paper further adopts a dialectical analysis that is somewhat historical to analyse the shift.

Findings

The measure of the Islamic banks’ performance in terms of their social ideals is misplaced, as the environment in which they currently operate does not support such goals. Thus, stemming from the theoretical base, the Islamic banks’ pursuance of profit maximization instead of falah should not be unexpected. The paper concludes that despite the unfavorable environment, the social ideals of the Islamic banking system may still be met, to an extent, through investment in microfinance and awqaf.

Research limitations/implications

The paper adopts document analysis for sourcing data majorly from prior studies. Hence, the authors do not conclude that the analysis herein is applicable to all Islamic banks. Secondly, as the authors could not get a complete historical account of the Islamic banking system’s development, some aspects of the dialectical analysis – contradiction and change – have been discussed in a general fashion.

Practical implications

The need for Islamic banks in the current environment, especially for the Muslim population, cannot be over emphasized; however, the achievement of falah given this current environment may be daunting.

Originality/value

The current analyses of the shift of Islamic banks from pursuing falah to pursuing profit maximization are not well-defined, as they lack a proper theorization of the challenges faced by Islamic banks. This paper fills this gap.

Details

Journal of Islamic Accounting and Business Research, vol. 8 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 23 September 2013

Zayyad Abdul-Baki, Ahmad Bukola Uthman, Atanda Aliu Olanrewaju and Solihu Aramide Ibrahim

This paper aims to argue that the methodologies adopted by the conventional management accounting in selecting between or among two or more alternative courses of action…

Abstract

Purpose

This paper aims to argue that the methodologies adopted by the conventional management accounting in selecting between or among two or more alternative courses of action, both in the long-term and the short-term decision making endeavours conflict with the overall objective ( falah) of Islamic enterprises.

Design/methodology/approach

The paper explores relevant literatures (including the Qur'an and the Hadeeth) to ascertain the objective of an Islamic enterprise and suggest an alternative approach, in making a choice among alternative courses of action, that aligns with the Islamic socio-economic objective ( falah).

Findings

The paper suggests that both in long-term and short-term decision making endeavours, cost-benefit comparison (where cost includes negative externalities) rather than discounted cashflow techniques or contribution margin should be adopted in making a final choice among alternatives to achieve falah.

Research limitations/implications

The paper has not considered other objectives that may be pursued by an organisation beside profit maximization whether short-term or long-term.

Practical implications

The paper expands the frontiers of knowledge in Islamic accounting by exposing the inadequacy of the conventional management accounting decision making methods.

Originality/value

This paper explores the Islamic perspective of the conventional management accounting which is rare among scholars of accounting.

Details

Journal of Islamic Accounting and Business Research, vol. 4 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 8 December 2020

Serge Agbodjo, Kaouther Toumi and Khaled Hussainey

The purpose of this study is to investigate the value relevance of accounting information for Islamic, conventional and hybrid banks. It also investigates the moderation…

Abstract

Purpose

The purpose of this study is to investigate the value relevance of accounting information for Islamic, conventional and hybrid banks. It also investigates the moderation impact of IFRS adoption and AAOIFI mandatory adoption on value relevance of accounting information.

Design/methodology/approach

Using value relevance models, The authors run panel data regressions on 47 Islamic banks, 112 conventional banks and 42 hybrid banks (conventional banks with Islamic windows). The study covers listed banks from 14 countries over the period 2010–2018.

Findings

paper offers three empirical evidences. First, the authors find that value relevance of accounting information is higher for Islamic banks, compared to conventional banks. Second, the authors find that IFRS framework strengthens the relevance of accounting information in Islamic banks, but the authors did not find the same for hybrid banks. Third, the authors find that the mandatory adoption of AAOIFI accounting standards has a moderation effect on value relevance of accounting information for both Islamic banks and hybrid banks. The robustness analysis shows that there is a significant contribution of compliance with Islamic Finance rules in IBs and HBs, which substantially reduces managers' opportunistic behavior to manage accounting information.

Research limitations/implications

One limit of this research is the reduced number of sampled listed IBs since the authors deleted countries that do not have both listed Islamic and conventional banks.

Practical implications

The study is useful for investors that consider the Islamic ethical practices to make their investment decisions as well as for the standards-setting bodies that focus on establishing accounting standards for the Islamic banking industry.

Originality/value

The authors contribute to the value relevance literature by providing novel evidence on the value relevance in fully-fledged Islamic, fully-fledged conventional and hybrid Banks. The authors also provide new evidence on the moderating role of International Financial Reporting Standards (IFRS) and Auditing Organization for Islamic Financial Institutions standard (AAOIFI) for the value relevance of accounting information.

Details

Journal of Applied Accounting Research, vol. 22 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

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