Do Islamic Banks in Malaysia Use Provisions for Doubtful Debts to Smooth Their Results?
Fariddudin, Faisal (2011) Do Islamic Banks in Malaysia Use Provisions for Doubtful Debts to Smooth Their Results? [Dissertation (University of Nottingham only)] (Unpublished)
The purpose of this research is to examine the practice of income smoothing in the Malaysian Islamic banking sector. The Malaysian Islamic finance sector is one of the fastest, if not the fastest growing sector in its region. Though some might argue that Indonesia will surpass Malaysia in Islamic finance in the near future due to its massive Muslim population, Malaysia still leads the way in the ASEAN region in terms of development and practice of Islamic finance. Thus, as the main essence of Islamic finance, Islamic banking serves as the main catalyst of growth in Islamic finance. In an academic point of view, the dynamic provisioning practice by Islamic banks coupled with the development in recent years of the Islamic banking sector in Malaysia would give this dissertation a truly unique environment for research. As Islamic banks are bounded by syaria laws and concepts, these banks adopt a different set of finance and accounting policies set in place by the governing bodies in their respective region. This dissertation explores income smoothing practices in all 17 Malaysian Islamic banks, licensed by its central bank, over the period of 2008 till 2009. The findings were made based on the research done on those banks. Results confirm the practice of income smoothing by Malaysian Islamic banks over the chosen period. Furthermore, the practice of income smoothing by these banks were practiced by the manipulation of provisions for doubtful debts. These findings also signals the importance of regulatory bodies to monitor the Islamic banking sector so that the purpose of a moral and ethical banking, as reflected by Islamic banking in general, is not defeated.
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