Norfazella Mohd Fariz 1Nor Farizal Mohammed 2 Nur Syifa Zulkepli 1Amrizah Kamaluddin 1
Faculty of Accountancy, Universiti Teknologi MARA (UiTM) Selangor, Puncak Alam Campus, Bandar Puncak Alam, Malaysia. 1
Accounting Research Institute, Universiti Teknologi MARA (UiTM), Shah Alam Campus, Shah Alam; Faculty of Accountancy, Universiti Teknologi MARA (UiTM Selangor, Puncak Alam Campus, Bandar Puncak Alam, Malaysia. 2
The accountability of Shariah-compliant companies is essential to ummah to ensure the quality of earnings and enhance performance. This study examined the association of accounting conservatism, which is a proxy for accounting quality and the financial performance of Shariah-compliant companies in Malaysia. Financial statements with high quality assist in better decision making, thus preventing fraud activities and misappropriation of assets. The data consisted of 144 firm-year observations of Shariah-compliant companies from 2012 to 2017. The results revealed that accounting conservatism is a feature of financial statements of Shariah-compliant companies in Malaysia and accounting conservatism had a positive association with financial performance. The findings gave insights on the accounting quality and performance of the Islamic capital market in Malaysia. This study contributes to the knowledge of financial reporting quality by explaining the ethical behavior of companies using stewardship theory.
This study is one of very few studies which have investigated financial performance in relation to conservatism on listed Shariah-compliant companies by using two models which is Basu (1997) and Khan and Watts (2009) model.
Accounting conservatism, Financial performance, Accountability, Shariah-compliant companies, Malaysia.
Authors acknowledge the financial assistance from the Accounting Research Institute, Universiti Teknologi MARA.
The authors declare that they have no competing interests.
All authors contributed equally to the conception and design of the study.