Search

An efficient monitoring by an effective board can correlate the firm performance. The main purpose of this study is to examine the interaction of political connections and earnings quality on firm performance in Pakistani non-financial sector. The results show that politically connected firms have lower earnings quality. Using a sample of 114 actively trading firm on PSX for the period of 2011-2021, GMM estimates for panel data has been used. The significant and negative coefficient of interaction between earnings quality index and political connection shows the negative effect of manipulating earnings on all three performance measures of firms (ROA, ROE & PM) having politically connected directors as their board members. The results are consistent and support the prior research that Pakistani corporate sector has great influence of political connections. An interesting findings of this study are that this influence on accounting numbers is the reason behind financial crisis. Firms with political affiliations involve more in accrual earnings manipulations to improve financial numbers. These findings reveal that non-connected firms perform better than connected firms. Overall, the findings of this study are helpful for stakeholders, investors, supervisory and regulatory bodies to analyze the financial reports of politically connected firms even after the implementation of code of corporate governance and in improving financial reporting quality. Theoretically, the results support Agency theory and resource dependency theory. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to spotlight and explore various determinants of Islamic social reporting (ISR) in Islamic banks of Pakistan. Design/methodology/approach: The authors have used firm size, firm profitability, firm age, board size and board independence as determinants of ISR. The authors collected data from Islamic banks listed on Pakistan Stock Exchange for the period 2012–2019. Multiple estimation techniques, i.e. fixed effect model, random effect model and one-step difference generalized method of moment (GMM), have been applied. Findings: Random effect model was found to be more robust as compared to fixed effect model and one-step difference GMM. The results reported by the random effect model, preferred among the three, show that firm size, firm profitability, firm age and board size are important determinants of ISR in Islamic banks of Pakistan, while board independence does not determine social reporting for Islamic banks in Pakistan. Although social reporting in annual reports of Islamic banks in Pakistan is increasing, further improvement and compliance is required to ensure accountability and transparency in financial reporting as recommended by Islamic teachings. The study has certain managerial implications, especially for top management of Islamic banks. Originality/value: To the best of the authors' knowledge, this study is the first to discuss determinants of ISR in Islamic banks of Pakistan. The developed framework herein provides a precise guideline for Islamic banking to enhance their performance, which has never been discussed before. [ABSTRACT FROM AUTHOR]