Shariah Supervisory Board (SSB) And Earning Management In Islamic Banks

By Sepky Mardian

Abstract:

The asymmetric information in the sharia compliance is an agency problem faced by Islamic bank. The Sharia Supervisory Board (SSB) was expected to reduce asymmetric information that currently exists. The previous studies found that earning management also occurs in the Islamic banks, though likely less in the Islamic bank compared to the conventional. This study used all the full fledged Islamic commercial banks established. Bank data might vary from 1992 until 2013. The data points collected are 72 data from 11 Islamic banks. The earning management was measured by loss avoidance and abnormal loan loss provision. The SSB variables are indicated by SSB Size and the members of SSB with accounting and/or banking skill background. The model also incorporates the control variables – total assets, growth of assets, loan ratio, change cash flow and loan loss provision. The data has been analyzed by the logistic and linier regression methods. The study explains that the sharia supervisory board (SSB) is associated to the earning management measured by loss avoidance and not by abnormal loan loss provision. While the the members of SSB with accounting and/or banking skill background are not associated to the earning management measured by loss avoidance and abnormal loan loss provision.