Gulate the reporting selections available to managers in presenting the firm’s financial statements. This kind of regulation potentially reduces processing costs for financial statement users by delivering a commonly accepted language that managers can use to communicate with investors” (Healy and Palepu 2001, p. 412). Even though IAS/IFRS standards are viewed as as the most globally accepted small business language, it was argued that these requirements aren’t acceptable for Islamic banks. Much more in particular, IAS/IFRS standards don’t take into account the specific accounting treatment of IAH funds such as Bomedemstat Histone Demethylase disclosure concerning the distribution of earnings involving shareholders and IAHs and smoothing practices of profit payouts to IAHs, such as PER and IRR (Maali and Napier 2010; Suandi 2017). Similarly, as noted by Safieddine (2009), it was argued that “the economic reporting guidelines set by the International Accounting Requirements along with the Generally Accepted Accounting Principles don’t reliably reflect the correct efficiency of Islamic banks” (p. 144). Therefore, AAOIFI standards were created to enhance the transparency of Islamic banks that would permit satisfying shareholders and IAHs’ facts desires for selection generating processes (Al Sadah 2007). Furthermore, Karim (2001) highlighted the need to have of adopting AAOIFI accounting requirements considering that these requirements specifically cater to the distinctive qualities of Islamic banks. Indeed, AAOIFI provides Islamic accounting standards (AAOIFI FAS) on the way to report investment accounts and tends to make some disclosure specifications to them which include FAS N 5 “Disclosure of Bases for Profit Allocation between Owners’ Equity and Investment Account Holders” and FAS N six “Equity of Investment Account Holders and Their Equivalent,” which present a a lot more Thromboxane B2 custom synthesis uniform and transparent manner of accounting practice for IAH funds (Suandi 2017). Al-Baluchi (2006) discovered that the amount of voluntary disclosure within the annual reports of Islamic banks elevated immediately after the implementation of AAOIFI requirements. El-Halaby (2015) showed that the adoption of AAOIFI standards features a significant positive association with monetary disclosure as an alternative to other kinds of disclosure, which reflects the significance of your implementation of those standards in all Islamic banks. Based on Sarea and Hanefah (2013), AAOIFI accounting requirements address the special traits of items and solutions of Islamic monetary institutions. These requirements allow them to boost the credibility and reliability of their economic reports. Following Sarea and Hanefah (2013), this study makes use of a stakeholder theory that may explain the will need of precise accounting requirements (i.e., AAOIFI accounting standards) to establish the wants of IAHs as important stakeholders of Islamic banks. We, therefore, set our third hypothesis as follows. Hypothesis three (H3). The adoption of AAOIFI requirements positively affects the level of IAH disclosures in Islamic banks. 2.four. The Liquidity Level The degree of liquidity can also be a crucial indicator of banking solvency. Lahrech et al. (2014) identified in their study that bank liquidity features a considerable optimistic effect on profit distribution to IAHs. The authors noted that greater liquidity will aid Islamic banks to handle much less profit-sharing ratios and distribute far more profit to IAHs. You’ll find restricted research that examined the relationship between liquidity and corporate disclosure. In line with Watson et al. (2002), agency and signaling theories supply mixed benefits.
