Accounting Conservatism and Financial Performance: Accountability of Shariah Compliant Companies in Malaysia
Authors
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Norfazella Mohd Fariz
Faculty of Accountancy, Universiti Teknologi MARA (UiTM) Selangor, Puncak Alam Campus, Bandar Puncak Alam, Malaysia
https://orcid.org/0000-0002-0009-4647
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Nor Farizal Mohammed
Accounting Research Institute, Universiti Teknologi MARA (UiTM), Shah Alam Campus, Shah Alam; Faculty of Accountancy, Universiti Teknologi MARA (UiTM Selangor, Puncak Alam Campus, Bandar Puncak Alam, Malaysia
https://orcid.org/0000-0002-8111-3458
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Nur Syifa Zulkepli
Faculty of Accountancy, Universiti Teknologi MARA (UiTM) Selangor, Puncak Alam Campus, Bandar Puncak Alam, Malaysia
https://orcid.org/0000-0002-0009-4647
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Amrizah Kamaluddin
Faculty of Accountancy, Universiti Teknologi MARA (UiTM) Selangor, Puncak Alam Campus, Bandar Puncak Alam, Malaysia
https://orcid.org/0000-0003-3943-9988
DOI:
https://doi.org/10.18488/journal.73.2020.83.280.297Abstract
The accountability of Shariah-compliant companies is essential to ummah to ensure the quality of earnings and enhance performance. This study examined the association of accounting conservatism, which is a proxy for accounting quality and the financial performance of Shariah-compliant companies in Malaysia. Financial statements with high quality assist in better decision making, thus preventing fraud activities and misappropriation of assets. The data consisted of 144 firm-year observations of Shariah-compliant companies from 2012 to 2017. The results revealed that accounting conservatism is a feature of financial statements of Shariah-compliant companies in Malaysia and accounting conservatism had a positive association with financial performance. The findings gave insights on the accounting quality and performance of the Islamic capital market in Malaysia. This study contributes to the knowledge of financial reporting quality by explaining the ethical behavior of companies using stewardship theory.
