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Corporate social responsibility, Shariah-compliance, and earnings quality.

Alsaadi, Abdullah and Ebrahim, M.S. and Jaafar, A. (2016) 'Corporate social responsibility, Shariah-compliance, and earnings quality.', Journal of financial services research., 51 (2). pp. 169-194.

Abstract

This study examines the effect of two potential sources of ethical principles on earnings quality: corporate social responsibility (CSR) and membership in a Shariah index. We define membership in a Shariah index as the adherence to an ethical code that relates to Islam. Our sample comprises firms in ten European Union countries for the period from 2003 to 2013. The empirical results show that firms with a high degree of CSR are less likely to manage earnings. In contrast, membership in a Shariah index leads to earnings manipulation. Our results are robust after using several alternative quality metrics for earnings. Furthermore, our empirical results indicate that highly rated CSR firms that are not Shariah-compliant are less likely to engage in earnings manipulation. Further, institutional factors are also important in determining the link between CSR, Shariah-compliance, and the quality of financial reporting.

Item Type:Article
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Status:Peer-reviewed
Publisher Web site:http://dx.doi.org/10.1007/s10693-016-0263-0
Publisher statement:© The Author(s) 2016 Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
Record Created:29 Jun 2016 16:21
Last Modified:16 Mar 2017 13:32

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