The Adoption of AAOIFI Standards by Islamic Banks: Understanding the Microeconomic Consequences

Study Overview

The study measured the microeconomic consequences of the adoption of AAOIFI standards on the conservatism, financial performance (FP), and earnings management (EM) of Islamic banks (IBs). The study draws on data from 122 IBs across 22 countries over a period of eight years (2014–2021), using the generalised method of moments (GMM).

The results indicate a positive impact of AAOIFI adoption on financial performance and conservatism compared to non-adopters. Islamic banks that adopt AAOIFI are also less involved in earnings management.

Key Findings

Implications

The implications of the study are potentially valuable for those setting accounting standards (such as AAOIFI and International Accounting Standards Board (IASB)), central banks, financial market regulators, investors, governments, and any adopting or non-adopting Islamic financial institutions (IFIs) through identification of the effects of AAOIFI adoption.

Publication Details

The study was published in the Economies Journal. It is indexed by Scopus Q1 and ESCI (Web of Science). For more information, you can read the full paper at this link: https://doi.org/10.3390/economies11020039.