Jul 2026· Journal of Financial Reporting & Accounting· pp. 1-30· 0 citations· 76 references
Abstract
This study aims to examine the relationship between risk exposures and financial performance in Islamic banks and evaluates how external audit quality moderates this relationship.
The analysis is based on a panel dataset comprising 1,411 bank-year observations from 100 Islamic banks across 30 countries between 2002 and 2023. Seven core risk dimensions are analyzed both individually and in aggregate form. The models use Pooled Ordinary Least Squares, Fixed Effects and System Generalized Method of Moments estimators to account for unobserved heterogeneity and endogeneity. Audit quality is proxied by the presence of Big-4 audit firms.
Higher levels of aggregated risk are consistently associated with lower financial performance. Operational and credit risks exert the most adverse effects, while liquidity risk shows a positive association with profitability, due to the unique liquidity management strategies in Shariah-compliant banking. Audit quality exhibits a differentiated moderating role, amplifying the financial impact of certain risks (e.g. credit, liquidity) while dampening the effects of others (e.g. return volatility).
The study provides an empirical analysis of how risk exposures, both individually and collectively, affect Islamic banks’ performance, incorporating the conditional influence of external audit quality. It offers practical insights for strengthening audit governance and risk oversight mechanisms in Islamic financial institutions.
This study investigates the impact of liquidity risk on asset quality and financial stability in Uzbekistan’s commercial banking sector. Using quarterly time-series data from 2016 to 2024, the study employs Ordinary Least Squares (OLS) regression with quadratic specifications to capture potential non-linear effects of liquidity. Two models are estimated to examine (i) the relationship between liquidity risk and asset quality, and (ii) the impact of liquidity risk on financial stability, proxied by net profit. The results indicate that liquidity risk does not have a statistically significant effect on asset quality, suggesting that credit performance is primarily driven by structural and macroeconomic factors rather than liquidity conditions. In contrast, the financial stability model demonstrates high explanatory power (R2 = 0.883), although individual coefficients are statistically insignificant due to severe multicollinearity among banking sector variables. The findings do not support the conventional liquidity–profitability trade-off hypothesis, as no evidence of a linear or non-linear relationship between liquidity and profitability is observed. Regulatory capital emerges as the most influential variable, indicating the importance of capital strength in supporting banking stability. This study contributes to the literature by providing novel empirical evidence from a transition economy, highlighting the limitations of isolating liquidity effects in rapidly expanding banking systems. The results suggest that in reform-oriented financial environments, banking stability is shaped more by structural growth and capital adequacy than by liquidity trade-offs, offering important implications for macroprudential policy design.
Akrom A. Omonov, B. Izbosarov, Erlane K. Ghani· Journal of Risk and Financia...· 0 citations
This research investigates the impact of components of corporate governance, the disclosure
of liquidity risk, and the financial performance of Deposit Money Banks (DMBs) quoted on
the Nigerian Exchange Group (NGX). The study is motivated by the persistent problems of
fragility of the banking sector which have continued to exist despite regulatory reforms. In
this study, corporate governance is broken down to include mechanisms at the board level
(Corporate Governance Index - CG) and mechanisms at the committee level (Audit/Risk
Committee Mechanisms - ACM). In addition, liquidity risk disclosure is broken down to
include quantitative disclosure (QDIS). The study adopted an ex post facto research design
with a longitudinal approach. The study covered a ten-year period (2016–2025) and included
seven listed DMBs, which provided a total of 70 bank-year observations. Fixed-effects panel
regression analyses were applied, while leverage was included as a control variable. The
financial performance of the banks was evaluated using ROA and Tobin’s Q. The findings
indicate that CG had a positive and significant effect on Tobin’s Q (p=0.0174) but not on
ROA, while QDIS showed a highly positive and significant effect on Tobin’s Q (p=0.0003)
but no significant effect on ROA. ACM had no significant effect on both performance
measures. In the joint model, CG and QDIS were the only statistically significant predictors
of Tobin’s Q (Adjusted R²=0.2678, p=0.0011) while ACM remained statistically
insignificant. The study establishes that corporate governance and the quantitative disclosure
of liquidity risk were the significant predictors of the market-based performance of the banks,
with disclosure being the dominant control of bank valuation. The study recommends to
improve the quality of boards of directors, increase quantitative liquidity disclosures beyond
the level required by regulations, and provide more tailored regulations to clarify the
distinction of the board and committee functions. The study adds to existing literature by
breaking down the components of governance and disclosure and providing evidence of the
Nigerian banking sector after the reforms.
Giwa, Adetoun Fatimoh, A. O. Ayodele· Journal of Accounting and Fi...· 0 citations
This study investigates the impact of deposit insurance on bank risk-taking and examines how Islamic banking architectures moderate this relationship in the MENA region's dual banking system.
We apply panel quantile regressions to an unbalanced dataset of 136 commercial banks across 9 MENA countries from 2011 to 2023. The empirical framework uses four distinct risk dimensions: SDROA, POR, a normalized Z-score and ROA.
Deposit insurance significantly reduces bank risk-taking, demonstrating that stabilization benefits dominate classical moral hazard in fragile regimes. This effect is highly asymmetric and concentrates heavily in high-risk tails. Through unique governance and contractual constraints, Islamic banking operations strengthen asset volatility reduction but weaken portfolio asset-shifting trends.
Regulators should implement differentiated deposit insurance schemes tailored specifically to the unique risk-sharing properties of Islamic contracts. Overhauling and strengthening Sharia governance frameworks provides a critical mechanism to optimize overall macro-financial stability.
This is the first empirical work to model the structural interaction between deposit insurance safety nets and Islamic corporate frameworks across an entire risk distribution using a quantile approach.
Mohamed Albaity, Hasan Mustafa, Yousef Damra et al.· International Journal of Eme...· 0 citations
This study examines the influence of good corporate governance, financial reporting timeliness, audit tenure, and auditor reputation on earnings quality in banking sector companies listed on the Indonesia Stock Exchange during the 2020–2024 period. The study is motivated by the critical importance of earnings quality in the banking sector, which operates in a highly regulated environment and plays a strategic role in maintaining national financial stability, particularly during the post-pandemic period characterized by economic pressures and increased earnings management incentives. The sample consists of commercial banks consistently listed on the Indonesia Stock Exchange during the observation period, selected using purposive sampling. Panel data regression with the Random Effect Model was employed to test the proposed hypotheses. The results indicate that auditor reputation has a significant negative effect on earnings quality, suggesting that banks audited by Big Four auditors tend to exhibit lower earnings quality compared to those audited by non-Big Four auditors. In contrast, good corporate governance, financial reporting timeliness, and audit tenure do not significantly influence earnings quality. However, all variables simultaneously have a significant effect on earnings quality, explaining 22.91% of its variation. These findings suggest that auditor reputation plays a more significant role in influencing earnings quality than other governance and audit characteristics in the Indonesian banking sector, providing valuable insights for regulators, banking management, and investors in assessing and enhancing earnings quality.
Irvan Juliansah, Khoirul Huda, Imas Kismanah et al.· International Journal of Acc...· 0 citations
This study examines the determinants of financial distress in Indonesian property and real estate companies, with audit quality as a moderating variable and profitability as a mediating variable. The study is motivated by the vulnerability of the property sector to macroeconomic shocks, including the COVID-19 pandemic (2021–2022), high inflation (2023), and interest rate hikes (2024), which have collectively intensified financial pressure on firms. The sample consists of property and real estate companies listed on the Indonesia Stock Exchange during 2021–2024, selected using purposive sampling. Panel data regression and Moderated Regression Analysis (MRA) with the Random Effect Model (REM) were employed to test the proposed hypotheses. The results indicate that leverage and earnings management significantly increase financial distress, while liquidity, sales growth, and tax avoidance show no significant direct effect. Furthermore, audit quality moderates the relationship between liquidity and financial distress, as well as tax avoidance and financial distress, but does not moderate the effects of leverage, sales growth, or earnings management. Profitability mediates only the relationship between earnings management and financial distress, suggesting that firms with higher profitability are better able to offset the negative impact of earnings manipulation on financial stability. These findings suggest that maintaining balanced leverage and transparent reporting practices are crucial to avoid financial distress, particularly in capital-intensive sectors such as property and real estate.
Mohamad Zulman, B. Olawale, Dilla Aisyah Putri et al.· International Journal of Acc...· 0 citations
This study examined the effect of audit committee attributes on credit risk management of
deposit money banks in Nigeria over the period 2009–2024. Credit risk was proxied by non
performing loan ratio, while audit committee attributes were measured using financial
expertise, chairperson tenure, gender diversity, and overlapping membership. Panel data
techniques were employed, with preliminary analyses including descriptive statistics,
normality tests, and correlation analysis. Given the presence of heteroscedasticity,
autocorrelation, and cross-sectional dependence, the Driscoll–Kraay standard error
estimator was adopted to ensure robust inference. The findings revealed that in contrast,
audit committee independence and financial expertise showed significant positive effects on
non-performing loans, suggesting potential governance inefficiencies or contextual
limitations in their effectiveness. The study concluded that the relationship between audit
committee attributes and credit risk in Nigerian deposit money banks is complex and context
dependent, rather than uniformly aligned with theoretical expectations. It recommended
strengthening the qualitative effectiveness of audit committees, particularly in member
competence, independence quality, and leadership stability, rather than focusing solely on
structural compliance. The study contributed to corporate governance literature by providing
empirical evidence from an emerging economy and introducing nuanced insights into
underexplored audit committee characteristics.
Serah Uduak Odudoh, E. Ukpong, Prof. Joseph O. Udoayang et al.· IIARD INTERNATIONAL JOURNAL...· 0 citations