Voluntary adoption of AAOIFI disclosure standards for takaful operators: the role of governance
File version
Author(s)
Abdullah, Wan Amalina Wan
Percy, Majella
Griffith University Author(s)
Primary Supervisor
Other Supervisors
Editor(s)
Date
Size
File type(s)
Location
License
Abstract
Purpose: This paper aims to determine the role governance plays in the voluntary adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Disclosure Standards by Islamic insurance (takaful) operators in the Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions.
Design/methodology/approach This study uses a sample of 44 takaful operators in the SEA and the GCC regions. While corporate governance (CG) strength is measured by the use of the frequently examined variables of the board of directors and audit committee, Shari’ah governance strength is measured by the characteristics of the Shari’ah Supervisory Board (SSB). Content analysis is used to extract disclosure items from the 2014 annual reports. Agency theory, stakeholder theory and political economy theory are argued to support the hypotheses.
Findings: The results show that CG strength has a positive and significant effect on the voluntary adoption of AAOIFI Disclosure Standards by takaful operators, indicating that CG plays an important role in the disclosure of information in the annual reports of takaful operators. However, the results show a lack of association between SSB strength and voluntary adoption of AAOIFI Disclosure Standards. Our results suggest that the SSBs may not be as involved as the other CG mechanisms (such as a board of directors and audit committees) in reviewing financial reports. On another note, the level of the political right and civil liberties has a negative and significant effect on the voluntary adoption of AAOIFI Disclosure Standards, providing an indication that stakeholders in a community with greater freedom tend to be more active in pressuring takaful operators to provide more information to justify their existence in the community. Similar to SSB strength, the legal system is also found to have no significant association with the voluntary adoption of the AAOIFI disclosure standards.
Practical implications: This study provides stakeholders with a tool to evaluate the effectiveness of the governance role in increasing the transparency of takaful operators by examining the governance factors using a self-constructed disclosure index.
Originality/value: Our study is among the first to provide an in-depth analysis of voluntary adoption of AAOIFI Disclosure Standards for takaful operators in these two regions; therefore, this study has implications for regulators and standard setters. The findings of this study are expected to provide information to regulators and standard setters on the role of governance in improving the transparency of takaful operators.
Journal Title
Journal of Islamic Accounting and Business Research
Conference Title
Book Title
Edition
Volume
12
Issue
4
Thesis Type
Degree Program
School
Publisher link
Patent number
Funder(s)
Grant identifier(s)
Rights Statement
Rights Statement
Item Access Status
Note
Access the data
Related item(s)
Subject
Accounting, auditing and accountability
Banking, finance and investment
Social Sciences
Business & Economics
Voluntary disclosure
AAOIFI
Persistent link to this record
Citation
Zain, FAM; Abdullah, WAW; Percy, M, Voluntary adoption of AAOIFI disclosure standards for takaful operators: the role of governance, Journal of Islamic Accounting and Business Research, 2021, 12 (4), 593-622