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