Voluntary Risk Disclosures of Islamic Financial Institutions: The Role of AAOIFI Standards Implementation

The implementation of the Accounting and Auditing Organization for Islamic Financial Institutions standards (AAOIFI) can improve risk disclosure practices financial institutions (IFIs) that eventually will reduce information asymmetry legitimacy. However, its role in presence Risk Management Committee (RMC) Sharia Supervisory Board (SSB) with voluntary (VRD) has not been investigated before. Therefore, this study investigates AAOIFI on relationship between RMC SSB effectiveness VRD. sample consists 167 firm-year observations IFIs listed Saudi Arabian Stock Exchange (TADAWUL) from 2013 to 2017. Data are collected annual reports. Agency signalling theories explain effect Additionally, legitimacy theory predicts moderating standards. results show have a positive level does strengthen This insignificant finding could be due non-mandatory nature Arabia. enhance current understanding importance effective reporting amongst IFIs. findings also useful regulatory bodies policymakers develop policies regulations influence transparent by companies. Keywords: Voluntary disclosure; Committee; Board; AAOIFI; Arabia