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Corporate Social Responsibility, Shariah-Compliance, and Earnings Quality

Alsaadi, Abdullah; Ebrahim, M.S.; Jaafar, A.

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Authors

Abdullah Alsaadi

A. Jaafar



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.

Citation

Alsaadi, A., Ebrahim, M., & Jaafar, A. (2016). Corporate Social Responsibility, Shariah-Compliance, and Earnings Quality. Journal of Financial Services Research, 51(2), 169-194. https://doi.org/10.1007/s10693-016-0263-0

Journal Article Type Article
Acceptance Date Aug 8, 2016
Online Publication Date Aug 31, 2016
Publication Date Aug 31, 2016
Deposit Date Jun 29, 2016
Publicly Available Date Jun 29, 2016
Journal Journal of Financial Services Research
Print ISSN 0920-8550
Electronic ISSN 1573-0735
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 51
Issue 2
Pages 169-194
DOI https://doi.org/10.1007/s10693-016-0263-0
Public URL https://durham-repository.worktribe.com/output/1378590

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Publisher Licence URL
http://creativecommons.org/licenses/by/4.0/

Copyright 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.





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