This paper examines whether institutional characteristics distinguishing Islamic from conventional banks lead to distinctive capital and earnings management behaviour through the use of loan loss provisions. In our sample countries including Qatar, Bahrain and Jordan, the two banking sectors operate under different regulatory frameworks: conventional banks currently apply the ‘incurred’ loan loss model until 2018 whereas Islamic banks mandatorily adopt an ‘expected’ loan loss model under the AAOIFI standards. Our results provide significant evidence of capital and earnings management practices via loan loss provisions in conventional banks. This finding is more prominent for large and loss-generating banks. By contrast, Islamic banks tend not to use loan loss provisions in either capital or earnings management, irrespective of the bank's size, earnings profile or the structure of their loan loss model. This difference may be attributed to the constrained business model of Islamic banking, strict governance and ethical orientation


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