Earnings Quality (EQ), Islamic Social Disclosure (ISCR), and on the association between EQ & ISCR : empirical evidence from Malaysian public listed companies

Abstract

This thesis integrates Shariah Law as an additional layer of regulations and Islamic Perspective of Accounting (IPA) framework to examine of the relation between Islamic Social Disclosure (ISCR) and Earnings Quality (EQ) of Malaysian public-listed companies. Five empirical studies were undertaken. First, accruals quality models suggested by previous researchers in the UK and the USA (Jones, 1991; Modified Jones, 1995; Dechow and Dichev 2002; McNichols, 2002) have been examined and reviewed in the new dataset; and McNichols model has been identified as the model that could accurately measure the quality of earnings reported. Second, the level of EQ has been examined. The multivariate analysis revealed that additional regulatory and cultural factors, and specifically the ethnicity of the chairperson, influenced the level of EQ. It was also found that there were variations in the level of EQ from year 2000 to year 2007. The largest contribution to this variation in year 2007 originated from the Delisted and Listed (DLL) group of companies. Third, the level of ISCR has been investigated and on average, the Product and Services theme scored the highest for disclosure (63%), followed by the Environment theme (55%), Community theme (39%), and Employees theme (27%). Fourth, the same range of factors tested to examine EQ has been specifically investigated against the ISCR score. The variables corresponding to institutional investors, top-ten shareholders, size of auditor and firm‟s involvement in foreign activities had a significant relationship with the ISCR. Fifth, the relationship between EQ and ISCR was examined. The results from the two-stage least squares (2SLS) method of analyses provided evidence that firms with poor earnings quality were more likely to disclose more social information. The contributions of this study include: i) a new research setting provides new research evidence on the effect of regulation regarding the EQ and ISCR issues; ii) the McNichols model and the modified ISCR checklist could be used by the stakeholders or other researchers to assess the situation of the Malaysian companies; iii) when the IPA framework is incorporated in the discussions together with Institutional theory, Environmental Determinism theory, Agency theory, Signalling theory, Stakeholder theory, and Legitimacy theory, it contributes to the richness of the existing literature; and iv) the findings regarding the relationship between EQ and ISCR indicates that the delivery of financial and non-financial information could still be improved to demonstrate the sense of responsibility and accountability of the management towards God (Allah) and towards the stakeholders.EThOS - Electronic Theses Online ServiceGBUnited Kingdo