This study develops a model of expropriation through real earnings management (REM) in the
Indonesian Islamic banking industry. The purpose of this study is to test a new model by examining
the relationship between REM, bank ownership types, and performance of Islamic banks in Indonesia
in the period of 2006 - 2013. This study finds that there are significant differences in REM and
performance scores in banks with different ownership types. The REM and performance scores for
family-owned banks and private-owned banks are relatively similar. However, Islamic banks with
government as the controlling shareholder have the highest REM scores and the lowest performance
scores. In contrast, foreign-owned banks have the lowest REM scores and the highest performance
scores. The indications of expropriation can be seen from the magnitude of REM. A high REM can
lower profitability and efficiency while increasing the risks faced by Islamic banks in Indonesia.
