Board Characteristics and Muslim Ownership Structure on Value Relevance of Accounting Information: Evidence from Malaysian Shariah Compliant Companies

Abdelhakhem Hamed Mohamed Ali Adaa; Mustafa Mohd Hanefah

doi:10.33102/jmifr.v15i2.176

Authors

Abdelhakhem Hamed Mohamed Ali Adaa Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia
Mustafa Mohd Hanefah Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

DOI:

https://doi.org/10.33102/jmifr.v15i2.176

Keywords:

Board size, Shariah background board of director, Muslim female, Muslim ownership structure, Value relevance of accounting information

Abstract

Corporate reporting is considered important because it provides information to assist internal and external corporate annual report users in making informed decisions. The high quality of financial reporting information is really significant, since employing this information can also lead to an increase in investment efficiency. Owners or shareholders need all necessary financial information for decision making. Nevertheless, even though they own the companies but the management is carried out by a pool of professionals – managers and directors. Thus, the directors set the directions and policies for the management team to run the company’s daily affairs. The separation between ownership and managers in firms leads to the agency problem between them. This study looks into the relationship between corporate governance characteristics (the size of the board of directors, the number of Shariah background directors, number of Muslim female in board, Muslim ownership structure) and value relevance of accounting information. Findings show a positive association between board size and value relevance of accounting information in Malaysian Shariah-compliant firms. However, there is not enough evidence to prove Shariah background members on board can enhance the value relevance of accounting information. Regarding the relationship between the presence of Muslim female directors in the board and the value relevance of accounting information, the results reveal insignificant relationship. The findings also indicate that companies with large Muslim ownership are negatively significant for value relevance of accounting information.

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Author Biographies

Abdelhakhem Hamed Mohamed Ali Adaa, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

Mustafa Mohd Hanefah, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

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