Profit distribution management by Islamic banks: An empirical investigation

The objective of this paper is to ascertain whether Islamic banks do in fact manage profit distributions and if so, what factors are associated with the extent of profit distribution management. The results suggest that most Islamic banks manage profit distributions, with the extent of profit distribution directly related to religiosity, financial development, asset composition, and existence of discretionary reserves, while it is inversely related to market familiarity with Islamic banking, market concentration, depositor funding reliance and the age of the Islamic bank.

► We examine whether Islamic banks manage profit distributions. ► We investigate the factors that contribute to profit distribution management. ► We find Islamic banks do manage profit distributions. ► Profit distribution is directly related to religiosity, financial development, asset composition, and existence of discretionary reserves. ► Profit distribution is inversely related to market familiarity with Islamic banking, market concentration, depositor funding reliance and the age of the Islamic bank.