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Article
Publication date: 19 June 2017

Abiot Mindaye Tessema, Samy Garas and Kienpin Tee

The purpose of this paper is to investigate whether disclosure as required by Islamic Financial Service Board Standard No. 4 (IFSB-4) influences information asymmetry…

Abstract

Purpose

The purpose of this paper is to investigate whether disclosure as required by Islamic Financial Service Board Standard No. 4 (IFSB-4) influences information asymmetry among investors in the Gulf Cooperation Council (GCC) member countries. In addition, the paper investigates whether the influence of IFSB-4 on information asymmetry varies between Islamic and conventional financial institutions.

Design/methodology/approach

The paper tests the hypotheses using a sample of firms listed in the GCC over a period of 2000-2013. Ordinary least square regression and fixed-effects estimation techniques are applied to test the hypotheses.

Findings

The findings reveal that information asymmetry among investors is lower after the implementation of IFSB-4 than before, indicating that the standard has increased transparency. The results also reveal that information asymmetry after the implementation of IFSB-4 is lower for Islamic than for conventional financial institutions. This suggests that IFAB-4 promotes more transparency for Islamic than conventional institutions.

Research limitations/implications

Owing to data availability, we were unable to use other proxies of information asymmetry, e.g. bid-ask spreads, and the level of disclosure, e.g. self-constructed disclosure index.

Practical implications

The paper concludes that disclosures under IFAB-4 reduce information asymmetry among investors. In this context, this study increases the awareness of standard setters academics investors regulators and many other stakeholders about the economic consequences of disclosure standards in the region.

Originality/value

This study takes a first step to fill evident gaps in the literature by investigating the influences of disclosure standard on information asymmetry in a unique setting that is often ignored by accounting researchers, which helps to widen our knowledge on accounting practices across the globe.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 10 no. 2
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 3 January 2018

Samy Garas and Suzanna ElMassah

The purpose of this study is to explore the impact of corporate governance (CG) on the corporate social responsibility (CSR) disclosures. This is done in the context of…

Abstract

Purpose

The purpose of this study is to explore the impact of corporate governance (CG) on the corporate social responsibility (CSR) disclosures. This is done in the context of firms operating in the Gulf Cooperation Council (GCC) countries and is largely based on the legitimacy theory, although other theories such as principal–agent theory and stakeholder theory are disucssed.

Design/methodology/approach

This study used the annual reports of 147 firms in the GCC countries, drawing on a legitimacy theory framework to determine the impact of CG characteristics, such as management ownership, ownership concentration, independence of board members, duality of CEO and chairman positions and the existence of an audit committee, on firms’ CSR disclosures to various stakeholders. Accordingly, the authors developed five hypotheses to examine the above variables and used a data set from Hawkamah – the Institute of Corporate Governance. This study covers a period of six years (2007-2012). The data set had been regressed in a multi-variate regression analysis.

Findings

The authors reported that greater managerial ownership and concentration of ownership have positive impact on CSR disclosures. The findings of this study also show that internal CG mechanisms, such as the independence of board members, the separation of powers, between the CEO and chairman positions and the existence of an independent audit committee, also have a positive influence on CSR disclosures. In addition, the leverage ratio, return on assets, company’s size and age emerge as important determinants of CSR disclosures; nevertheless, the company’s size and age are statistically not significant. These significant findings corroborate the recent concern with CG in developing countries that brings greater attention to CSR disclousures, as both internal and external CG mechanisms are effective in influencing the CSR practices.

Practical implications

This study fills the gap in literature by providing empirical evidence on the impact of CG on CSR disclosures in a significant region in the emerging economies. Furthermore, it alerts regulators, policy-makers, practitioners and firms’ executives in the GCC region and other developing countries to pay more attention to CG reforms and enforcement as well as to increase institutional pressures regarding CSR adaptation.

Originality/value

The study on how CG and CSR disclosures are connected has been limited. This study addresses this research gap and focuses on a region that has often been overlooked by accounting research.

Details

critical perspectives on international business, vol. 14 no. 1
Type: Research Article
ISSN: 1742-2043

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Article
Publication date: 10 October 2018

Mostafa Kamal Hassan, Bassam Abu Abbas and Samy Nathan Garas

This paper aims to examine the relationship between the readability of annual reports and corporate performance in Qatari listed firms while controlling for a firm’s…

Abstract

Purpose

This paper aims to examine the relationship between the readability of annual reports and corporate performance in Qatari listed firms while controlling for a firm’s competitive position, governance structure and specific features such as size, age and industry type.

Design/methodology/approach

This study relies on both agency theory and legitimacy theory to develop testable hypotheses. It uses a sample of 126 firm-year listed companies in the Qatar Stock Exchange to test obfuscation in the annual reports through examining the association between the readability of Narrative Disclosures (NDs) and corporate profitability, financial risk and agency costs for the period from 2014-2016.

Findings

The findings show that firms with higher annual report readability are more profitable and have lower agency costs, which is an indication of the existence of “obfuscation.” Qatari firms may use narrative complexity as a disclosure strategy to enhance their image and consequently maintain their social legitimacy.

Research limitations/implications

Although the study findings suffer from limited global generalization, they can be generalized across Gulf Cooperation Council countries. Thus, future cross-country research is encouraged.

Practical implications

The findings encourage Qatari policymakers to instate a policy for “Plain English” writing to make NDs easy to read by international investors.

Originality/value

This study is one of very few studies that examines the readability of annual reports in emerging market economies, i.e. Qatar. The study contributes to the paucity of research that examines English-written annual reports in non-English speaking countries.

Details

Corporate Governance: The International Journal of Business in Society, vol. 19 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 15 June 2012

Samy Nathan Garas

The purpose of this study is to identify the relation between the conflicts of interest in the Shari'a Supervisory Board (SSB) in the Islamic financial institutions (IFIs…

Abstract

Purpose

The purpose of this study is to identify the relation between the conflicts of interest in the Shari'a Supervisory Board (SSB) in the Islamic financial institutions (IFIs) and six independent variables: the SSB executive position, the SSB remuneration, the relation between the SSB members and the Board of Directors (BoD), and the multiple memberships in Islamic funds, issuers of Islamic bonds (Sukuk), and companies trading in capital markets.

Design/methodology/approach

The variables are articulated in six hypotheses and tested by ordinary least square regression. The data were collected via a questionnaire which was sent to the shareholders, the BoD, and the SSB members of all of the IFIs in the Gulf Cooperation Council (GCC) countries.

Findings

The results indicate that the SSB executive position, the relation between the SSB members and the BoDs, and the membership in Islamic funds and issuers of Islamic bonds are significantly related to the conflicts of interest, whereas remuneration and membership in companies trading in capital markets have insignificant relation.

Research limitations/implications

The paper does not address the impact of SSB ownership in the IFIs, or the relation between the SSB and the shareholders, or the impact of the corporate governance codes on the relationship between the IFI and the SSB.

Practical implications

The study recommends testing the hypotheses in other geographies to generalize the results, and measuring the impact of the SSB ownership on the conflicts of interest as well as its relation with shareholders, regulators, and clients.

Social implications

The paper provides practical implications to the SSB members and the BoD in the IFIs and calls for setting a maximum number of SSBs for each SSB member.

Originality/value

This study contributes to the literature gap of the SSB role in the governance of IFIs. It is believed to be one of first studies that provide empirical evidence about the SSB conflicts of interest in the IFIs of the GCC region.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 2
Type: Research Article
ISSN: 1753-8394

Keywords

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Article
Publication date: 16 November 2010

Samy Nathan Garas and Chris Pierce

The governance structure of Islamic financial institutions (IFIs) implements Islamic canon law (Shari'a) into business transactions through Shari'a supervision processes…

Abstract

Purpose

The governance structure of Islamic financial institutions (IFIs) implements Islamic canon law (Shari'a) into business transactions through Shari'a supervision processes. This paper aims to define Shari'a supervision and examine Shari'a supervisory councils (both within and outside the Central Bank), Shari'a consulting firms, Shari'a advisors, and Shari'a Supervisory Boards (SSB). It also discusses the importance of the hierarchical position of SSBs and evaluates their objectives and functions.

Design/methodology/approach

The paper reviews a wide range of theoretical literatures especially recent proceedings of relevant conferences in the Gulf Cooperation Council (GCC) countries along with the standards of the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI). A framework for understanding the role of the SSB is developed suggesting a set of objectives and functions for the SSB.

Findings

The paper finds a lack of standardization among the IFIs concerning the position of the SSB within the corporate hierarchy. Moreover, the SSB is found to control the IFIs activities more than the other types of Shari'a supervision such as Shari'a consulting firms and Shari'a advisors.

Research limitations/implications

The research focuses exclusively on the GCC countries and excludes the other Middle East and Far East countries where Shari'a supervision might have different forms.

Social implications

The research provides guidelines for IFIs in defining the SSB role in their governance structure and recommends the SSB among the other forms of Shari'a supervision (Shari'a consulting firms and Shari'a advisors) in controlling the IFIs activities.

Originality/value

This study contributes to the literature gap about the governance of IFIs. It is one of the first studies that provide a conceptual foundation for the SSB role in the governance structure of IFIs.

Details

Journal of Financial Regulation and Compliance, vol. 18 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 30 March 2012

Samy Nathan Garas

The Islamic financial institutions (IFIs) maintain better control over their transactions than conventional financial institutions (CFIs) through the existence of Shari'a…

Abstract

Purpose

The Islamic financial institutions (IFIs) maintain better control over their transactions than conventional financial institutions (CFIs) through the existence of Shari'a Supervisory Board (SSB) and Shari'a Control Department (SCD). The purpose of this paper is to highlight the superiority of Shari'a supervision over external audit and Shari'a audit over internal audit. The study identifies five independent variables that affect the SSB control: ex‐ante Shari'a audit; ex‐post Shari'a audit; SCD reporting to the SSB; corrective actions of SSB towards the management violations; and the number of SSB members.

Design/methodology/approach

The variables are articulated in five hypotheses, which are tested by ordinary least square regression. The data are collected via a questionnaire which was sent to the SSB members of 219 IFIs in the Gulf Cooperation Council (GCC) countries.

Findings

The results indicate that ex‐ante Shari'a audit, ex‐post Shari'a audit, and reporting of SCD are significantly related to the SSB control, whereas corrective actions and the number of SSB members have insignificant relation.

Research limitations/implications

The research is focused on internal factors only, without considering other external factors such as stakeholders and regulators. Also, the research covered the GCC region alone.

Practical implications

The research recommends testing the hypotheses in other geographies to generalize the results, and including external factors as well as shareholders and board of directors.

Social implications

The research provides practical implications for the SCD role and calls for merging the SCD with the traditional internal audit department to reduce the excessive work of controlling.

Originality/value

The paper contributes to the literature gap about the SSB. It is believed to be one of few studies that provide empirical evidence about the SSB control in the IFIs of the GCC region.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Content available
Article
Publication date: 14 April 2014

Abstract

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 7 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

Content available
Article
Publication date: 15 June 2012

M. Kabir Hassan

Abstract

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 2
Type: Research Article
ISSN: 1753-8394

Content available
Article
Publication date: 30 March 2012

M. Kabir Hassan

Abstract

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 1
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 22 July 2021

Tamanna Dalwai, Syeeda Shafiya Mohammadi, Gaitri Chugh and Mahdi Salehi

This study examines the impact of intellectual capital efficiency and corporate governance mechanisms on the annual report readability of Oman's financial sector companies.

Abstract

Purpose

This study examines the impact of intellectual capital efficiency and corporate governance mechanisms on the annual report readability of Oman's financial sector companies.

Design/methodology/approach

The study uses a sample of 150 firm-year observations of listed financial sector companies in the Muscat Securities Market, Oman, from 2014 to 2018. Flesch Reading ease and Flesch Kinkaid Index are used as proxies for annual report readability. As part of sensitivity analysis, the study also uses the natural logarithm of annual report pages as alternative readability measures. The investigation is conducted using random effects regression analysis and supported with system GMM estimation for robustness.

Findings

The findings of this study demonstrate a decrease in intellectual capital efficiency associated with better readability of annual reports for the financial sector firms. Alternatively, banks report a positive association of intellectual capital efficiency with the Flesch Reading ease score of the annual report. The structural capital and capital employed efficiency are also found to be negatively associated with annual report readability. Corporate governance mechanisms such as dispersed ownership and audit committee size also result in easy-to-read annual reports that support agency theory.

Research limitations/implications

The research was conducted for financial firms of Oman, and thereby the findings can be generalized to the financial sector of countries with similar settings, such as the Gulf Cooperation Council (GCC) region.

Practical implications

The policy implications arising from this study suggest a strengthening of the intellectual capital efficiency and corporate governance mechanisms to improve the readability of the firms and thereby increase investor confidence.

Originality/value

This paper's uniqueness is in the model used to investigate the impact of intellectual capital efficiency and corporate governance mechanisms on the annual report readability of an emerging market.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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