Mohd Yaziz MOHD ISA • Zabid Haji ABDUL RASHID

Islamic Deposits and Investment Accounts in Income Smoothing in Post-Reclassification of the Islamic Financial Service Act 2013

Expert Journal of Finance
2(1)
pp. 18-25
The Author(s). 2014

Received:
Accepted:
Published: December 30, 2014
This study attempts to determine the impact of the reclassification on income smoothing practices by Islamic banks in Malaysia through loss provisions. It is well acknowledged that Islamic banks set up an allowance for loss provisions in order to absorb any future losses. However, alternative mechanisms, such as Profit Equalization Reserve (PER) and Investment Risk Reserve (IRR) instead of loss provisions, are used to smooth income. This study determines whether the exercise by Islamic banks in Malaysia to reclassify Islamic deposits to investment accounts after the enacted Islamic Financial Service Act (2013), may have caused unintended consequences in less profit payout to investment account holders. The results do not indicate any unintended consequences of less profit payout to investment account holders from the present exercise by the Islamic banks in Malaysia to distinguish Islamic deposits from investment accounts.
Keywords
JEL Classification G21, G32
Full Article
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Article Rights and License
© 2014 The Authors. Published by Sprint Investify. ISSN 2359-7712. This article is licensed under a Creative Commons Attribution 4.0 International License. Creative Commons License
Corresponding Author
Mohd Yaziz Mohd Isa, Universiti Tun Abdul Razak, Bank Rakyat School of Business and Entrepreneurship, Kuala Lumpur, Malaysia
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Author(s)

Mohd Yaziz MOHD ISA
Universiti Tun Abdul Razak, Kuala Lumpur, Malaysia

Zabid Haji ABDUL RASHID
Universiti Tun Abdul Razak, Kuala Lumpur, Malaysia
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