Income smoothing and Islam: Evidence from Pakistan Shari’Ah compliant companies
Journal Title: Journal of Islamic Thought and Civilization (JITC) - Year 2016, Vol 6, Issue 0
Abstract
Income smoothing refers to the use of accounting techniques to level out net income fluctuations from one period to the next. Companies indulge in this practice to manipulate the earnings over the period in order to lower the level of uncertainty. The companies with constant earnings attract more investors as they are willing to pay more prices for company’s stock. This study examine the presence of artificial income smoothing in 64 Shari‘ah compliant companies listed in the financial market of Pakistan for the period 2008-2015. The study also takes into consideration the concept of income smoothing from an Islamic perspective. To achieve the study’s objectives, Eckel’s index model is used. The study found that 34 percent of the companies are non-smoothers and 66 percent of the companies are smoothers in pooled sample. Among high market capitalized 32 companies, 37.5 percent of the companies are non-smoothers and 62.5 percent are smoothing companies. In 32 low market capitalized companies, 31 percent companies are non- smoothing and 69 percent companies are practicing income smoothing.
Authors and Affiliations
Afia Mushtaq, Hassan Sultan, Farrukh Ijaz
Keywords
Related Articles
- EP ID EP490441
- DOI 10.32350/jitc.62.05
- Views 164
- Downloads 0
Religious Education: Analysis over the Years
The present study is an effort to gather research aspects for religious education in Pakistan. Religious education, most commonly known as madrasa education, has a profound history titled as Nizamiyah. Historical changes...
The concept of Tawhid in Islam: In the light of perspectives of prominent Muslim scholars
The concept of tawhid excludes man’s commitment to anyone other than Allah (SWT). Also a rejection of all sources of value other than will of Allah (SWT), all authority but His, and a refusal to accept any idea, command,...
Current Trends of Muslim Academia in Comparative Religions
Throughout the history of the study of religion or religions, many scholars had emerged and contributed to this vocation. Many international scholars; be them from the east and west, Muslims or non-Muslims; recognize Mus...
Maqasid-al-Shari‘ah vs. Contemporary Islamic Banking and Finance: The Case of Pakistan
One of the cardinal issues in Islamic banking and finance is how to reconcile the objectives of Islamic moral economy and observed current reality? The skeptics argue that Islamic banking and finance is not contributing...
Reformation: Religious, Political and Social Consequences for Western Society
Reformation was a theological movement in 16th century Europe to reform the Catholic Christianity. Luther, Calvin and Zwingli questioned the authority of dogma and supremacy of the pope in Rome. This led to the formation...