Which Type of Profit is Most Relevant to Islamic Entities? Evidence from Indonesia and Malaysia

Miladiah Kusumaningarti¹, Marhaendra Kusuma², Che Manisah Mohd Kasim³, Carlos Alfonso Barreto⁴

Abstract

This study aims to prove which of the six types of income is most relevant in sharia entities. The data for this study are the financial statements of sharia entities in Southeast Asia listed on the capital markets of Indonesia, Malaysia and Singapore during 2014-2024, totaling 32 entities and 314 observation data. In line with the theory of information content of income (Ball & Brown, 1968) and Ohlson (1995), the results of this study are consistent with the hypothesis proposed that net income is the most relevant compared to other types of income. Net income is most reacted to by the market, has the greatest predictive power over future cash flows and is the most persistent in sharia entities in these three Southeast Asian countries. The originality of this study is to compare the value relevance of six types of profit in the financial statements of sharia entities in Southeast Asia