摘要：This study examines whether Shariah-compliantcompanies practice earnings management byinvestigating the relationship among the riskof financial distress, leverage, and free cashflow in discretionary accruals, which functionas a substitute for earnings management. Thisempirical research is conducted on a sample ofMalaysian Shariah-compliant companies fromall industries in Bursa Malaysia from 2012 to2014. Results show that Shariah-compliantcompanies are highly influenced by the riskof financial distress, leverage, and free cashflow. This study argues that working as eitherShariah-compliant or non-Shariah-compliantdoes not affect the level of earnings managementthrough financial distress, high leverage, andfree cash flow by managers. Results should beof interest to stakeholders, shareholders, andregulatory bodies (i.e., the Shariah AdvisoryCouncil and the Securities Commission) thatoversee the accountability of corporate financialreporting to prevent earnings management inShariah-compliant companies. Findings canalso aid relevant authorities (i.e., the ShariahAdvisory Council and the Security Commission)in Malaysia in overcoming or reducing problemsrelated to earnings management. This study isone of the most significant works in Malaysia interms of sample size and methodology. It arguesthat the three elements of earnings management(i.e., financial distress, high leverage, and freecash flow) influence better disclosure of reportedearnings.
关键词：Earnings management; Free cash;flow; Financial distress; Shariah-compliant;companies; Malaysia
