Determinants of Islamic Social Responsibility Disclosure the Case of Islamic Bank: Cross Country Analysis
DOI:
https://doi.org/10.12928/ijiefb.v4i1.2123Keywords:
Islamic Social Responsibility, Islamic Corporate Governance, PRCL, sharia disclosure index, social disclosure indexAbstract
Introduction to The Problem: The rapid growth of Islamic financial institutions around the world attracts a lot of attention, but its growing is not supported by adequate accountability. Several evidence show that accountability of Islamic banks is still very low. The lack of accountability may causes low public trust, so it is important to study the determinant of Islamic Social Responsibility Disclosure by Islamic Bank.
Objective Study: This study intends to examine the determinants of Islamic Social Responsibility disclosure (ISR). So practitioners and academics can get a clear view of Islamic Bank's accountability through ISR disclosure.
Methodology: This paper applies some theories such as stakeholder theories, agency theory, and legitimacy theory to developed hypotheses linking ISR disclosure and its determinants (internationality, Islamic Corporate Governance, and Socio-Political Context). This paper uses the content analysis method to assess the ISR disclosure of Islamic banks from 13 countries spanning from 2014 to 2016. The ISR index consists of 72 items developed based on AAOIFI. Finally, OLS Regression Analysis is used to test the hypotheses.
Findings: The paper find that the level of ISR disclosure is still very low (44%). From the internationality aspect, we found that the proportion of foreign ownership and the status of the multinational corporation influenced the level of ISR disclosure, but we did not find evidence that the CEO's overseas experience affected the level of disclosure. This paper also confirm that Islamic Corporate Governance and Socio-Political context are the main determinant of ISR disclosure by Islamic Bank.
References
AAOIFI. (2015a). Corporate Social Responsibility Conduct and Disclosure for Islamic Financial Institutions (Governance Standard No. 7). Bahrain: Accounting and Auditing Organization for Islamic Financial Institutions.
AAOIFI. (2015b). Sharia Supervisory Board: Appointment, Compositions and Report (Governance Standard No. 1). Bahrain: Accounting and Auditing Organization for Islamic Financial Institutions.
Abu-Tapanjeh, A. M. (2009). Corporate governance from the Islamic perspective: A comparative analysis with OECD principles. Critical Perspectives on Accounting, 20(5), 556–567.
Akhtaruddin, M., Hossain, M., Hossain, M., & Yao, L. (2009). Corporate governance and voluntary disclosure in corporate annual reports of Malaysian listed firms. Journal of Applied Management Accounting Research, 7(1).
Branco, M. C., & Rodrigues, L. L. (2008). Factors Influencing Social Responsibility Disclosure by Portuguese Companies. Journal of Business Ethics, 83(4), 685–701. https://doi.org/10.1007/s10551-007-9658-z
Choi, J.-S. (1999). An investigation of the initial voluntary environmental disclosures made in Korean semi-annual financial reports. Pacific Accounting Review, 11(1).
Clarkson, M. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1), 92–117.
Dahya, J., Lonie, A. A., & Power, D. M. (1996). The case for separating the roles of chairman and CEO: An analysis of stock market and accounting data. Corporate Governance: An International Review, 4(2), 71–77.
Deegan, C. (2002). Introduction: The legitimising effect of social and environmental disclosures – a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282–311. https://doi.org/10.1108/09513570210435852
El-Halaby, S., & Hussainey, K. (2015). The determinants of social accountability disclosure: Evidence from islamic banks around the world. International Journal of Business, 20(3), 202–223.
El-Halaby, S., & Hussainey, K. (2016). Determinants of compliance with AAOIFI standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 9(1), 143–168. https://doi.org/10.1108/IMEFM-06-2015-0074
Ernst and Young. (2016). World Islamic Banking Competitiveness Report 2016. In Ernst and Young.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The Journal of Law and Economics, 26(2), 301–325.
Farook, S., Kabir Hassan, M., & Lanis, R. (2011). Determinants of corporate social responsibility disclosure: the case of Islamic banks. Journal of Islamic Accounting and Business Research, 2(2), 114–141. https://doi.org/10.1108/17590811111170539
Fifka, M. S., & Pobizhan, M. (2014). An institutional approach to corporate social responsibility in Russia. Journal of Cleaner Production, 82, 192–201.
Freedom House | Expanding freedom and democracy. (n.d.). Retrieved April 24, 2020, from https://freedomhouse.org/
Freeman, R. E. (1994). The politics of stakeholder theory: Some future directions. Business Ethics Quarterly, 409–421.
Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder Theory and “The Corporate Objective Revisited.†Organization Science, 15(3), 364–369. https://doi.org/10.1287/orsc.1040.0066
Garas, S. N., & Pierce, C. (2010). Shari’a supervision of Islamic financial institutions. Journal of Financial Regulation and Compliance, 18(4), 386–407.
Guthrie, J., & Parker, L. D. (1989). Corporate Social Reporting: A Rebuttal of Legitimacy Theory. Accounting and Business Research, 19(76), 343–352. https://doi.org/10.1080/00014788.1989.9728863
Hahn, R., & Kühnen, M. (2013). Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, 5–21. https://doi.org/10.1016/j.jclepro.2013.07.005
Hamdi, F. M., & Zarai, M. A. (2012). Earnings Management to Avoid Earnings Decreases and Losses: Empirical Evidence from Islamic Banking Industry. Research Journal of Finance and Accounting, 3(3), 88–107. Retrieved from http://www.ssrn.com/abstract=701525
Haniffa, R. M. (2001). Social responsibility disclosure: An Islamic perspective. Department of Accounting and Finance, University of Exeter, 1(4).
Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance and disclosure in Malaysian corporations. Abacus, 38(3), 317–349.
IFSB. (2016). Islamic Financial Services Industry Stability Report 2016. Kuala Lumpur, Malaysia.
Khurshid, M. A., Al-Aali, A., Soliman, A. A., & Amin, S. M. (2014). Developing an Islamic corporate social responsibility model (ICSR). Competitiveness Review, 24(4), 258–274. https://doi.org/10.1108/CR-01-2013-0004
Maali, B., Casson, P., & Napier, C. (2006). Social reporting by islamic banks. Abacus, 42(2), 266–289. https://doi.org/10.1111/j.1467-6281.2006.00200.x
Mersni, H., & Ben Othman, H. (2016). The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region. Journal of Islamic Accounting and Business Research, 7(4), 318–348. https://doi.org/10.1108/JIABR-11-2014-0039
Mitchell Williams, S. (1999). Voluntary environmental and social accounting disclosure practices in the Asia-Pacific region: An international empirical test of political economy theory. International Journal of Accounting, 34(2).
Muneeza, A., Ma’ruf, A., & Alam, S. (2020). CSR Contribution to Socio-Economic Development: Evidence from Indonesian Islamic Banks. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 3(1), 13–26. https://doi.org/10.12928/ijiefb.v3i1.949
Nahar, F. H., Faza, C., & Azizurrohman, M. (2020). Macroeconomic Analysis and Financial Ratios on Sharia Commercial Bank Profitability: A Case Study of Indonesia. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 3(1), 37–49. https://doi.org/10.12928/ijiefb.v3i1.1721
Sellami, Y. M., & Tahari, M. (2017). Factors influencing compliance level with AAOIFI Financial accounting standards by Islamic banks. Journal of Applied Accounting Research, 18(1), 137–159. https://doi.org/10.1108/JAAR-01-2015-0005
Singh, M., Mathur, I., & Gleason, K. C. (2004). Governance and Performance Implications of Diversification Strategies: Evidence from Large U.S. Firms. The Financial Review, 39(4), 489–526. https://doi.org/10.1111/j.0732-8516.2004.00086.x
Slater, D. J., Dixon-fowler, H. R., Slater, B. D., & Dixon-fowler, H. R. (2009). CEO International Assignment Experience and Corporate Social Performance. Journal of Business Ethics, 89(3), 473–489. https://doi.org/10.1007/sl0551-008-0011-y
Srairi, S. (2019). Transparency and bank risk-taking in GCC Islamic banking. Borsa Istanbul Review, 19, S64–S74. https://doi.org/10.1016/j.bir.2019.02.001
Thompson, K. W., & Gastil, R. D. (1982). Freedom in the World: Political Rights and Civil Liberties, 1981. Human Rights Quarterly, 4(4), 538. https://doi.org/10.2307/762216
Vinnicombe, T. (2010). AAOIFI reporting standards: Measuring compliance. Advances in Accounting, 26(1), 55–65. https://doi.org/10.1016/j.adiac.2010.02.009
Wibowo, M. G. (2020). Good Public Governance in Islamic Perspective: An Analysis on the World Governance Indicator in OIC Member Countries. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 3(1), 51–65. https://doi.org/10.12928/ijiefb.v3i1.1718
AAOIFI. (2015b). Sharia Supervisory Board: Appointment, Compositions and Report (Governance Standard No. 1). Bahrain: Accounting and Auditing Organization for Islamic Financial Institutions.
Abu-Tapanjeh, A. M. (2009). Corporate governance from the Islamic perspective: A comparative analysis with OECD principles. Critical Perspectives on Accounting, 20(5), 556–567.
Akhtaruddin, M., Hossain, M., Hossain, M., & Yao, L. (2009). Corporate governance and voluntary disclosure in corporate annual reports of Malaysian listed firms. Journal of Applied Management Accounting Research, 7(1).
Branco, M. C., & Rodrigues, L. L. (2008). Factors Influencing Social Responsibility Disclosure by Portuguese Companies. Journal of Business Ethics, 83(4), 685–701. https://doi.org/10.1007/s10551-007-9658-z
Choi, J.-S. (1999). An investigation of the initial voluntary environmental disclosures made in Korean semi-annual financial reports. Pacific Accounting Review, 11(1).
Clarkson, M. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1), 92–117.
Dahya, J., Lonie, A. A., & Power, D. M. (1996). The case for separating the roles of chairman and CEO: An analysis of stock market and accounting data. Corporate Governance: An International Review, 4(2), 71–77.
Deegan, C. (2002). Introduction: The legitimising effect of social and environmental disclosures – a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282–311. https://doi.org/10.1108/09513570210435852
El-Halaby, S., & Hussainey, K. (2015). The determinants of social accountability disclosure: Evidence from islamic banks around the world. International Journal of Business, 20(3), 202–223.
El-Halaby, S., & Hussainey, K. (2016). Determinants of compliance with AAOIFI standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 9(1), 143–168. https://doi.org/10.1108/IMEFM-06-2015-0074
Ernst and Young. (2016). World Islamic Banking Competitiveness Report 2016. In Ernst and Young.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The Journal of Law and Economics, 26(2), 301–325.
Farook, S., Kabir Hassan, M., & Lanis, R. (2011). Determinants of corporate social responsibility disclosure: the case of Islamic banks. Journal of Islamic Accounting and Business Research, 2(2), 114–141. https://doi.org/10.1108/17590811111170539
Fifka, M. S., & Pobizhan, M. (2014). An institutional approach to corporate social responsibility in Russia. Journal of Cleaner Production, 82, 192–201.
Freedom House | Expanding freedom and democracy. (n.d.). Retrieved April 24, 2020, from https://freedomhouse.org/
Freeman, R. E. (1994). The politics of stakeholder theory: Some future directions. Business Ethics Quarterly, 409–421.
Freeman, R. E., Wicks, A. C., & Parmar, B. (2004). Stakeholder Theory and “The Corporate Objective Revisited.†Organization Science, 15(3), 364–369. https://doi.org/10.1287/orsc.1040.0066
Garas, S. N., & Pierce, C. (2010). Shari’a supervision of Islamic financial institutions. Journal of Financial Regulation and Compliance, 18(4), 386–407.
Guthrie, J., & Parker, L. D. (1989). Corporate Social Reporting: A Rebuttal of Legitimacy Theory. Accounting and Business Research, 19(76), 343–352. https://doi.org/10.1080/00014788.1989.9728863
Hahn, R., & Kühnen, M. (2013). Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, 5–21. https://doi.org/10.1016/j.jclepro.2013.07.005
Hamdi, F. M., & Zarai, M. A. (2012). Earnings Management to Avoid Earnings Decreases and Losses: Empirical Evidence from Islamic Banking Industry. Research Journal of Finance and Accounting, 3(3), 88–107. Retrieved from http://www.ssrn.com/abstract=701525
Haniffa, R. M. (2001). Social responsibility disclosure: An Islamic perspective. Department of Accounting and Finance, University of Exeter, 1(4).
Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance and disclosure in Malaysian corporations. Abacus, 38(3), 317–349.
IFSB. (2016). Islamic Financial Services Industry Stability Report 2016. Kuala Lumpur, Malaysia.
Khurshid, M. A., Al-Aali, A., Soliman, A. A., & Amin, S. M. (2014). Developing an Islamic corporate social responsibility model (ICSR). Competitiveness Review, 24(4), 258–274. https://doi.org/10.1108/CR-01-2013-0004
Maali, B., Casson, P., & Napier, C. (2006). Social reporting by islamic banks. Abacus, 42(2), 266–289. https://doi.org/10.1111/j.1467-6281.2006.00200.x
Mersni, H., & Ben Othman, H. (2016). The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region. Journal of Islamic Accounting and Business Research, 7(4), 318–348. https://doi.org/10.1108/JIABR-11-2014-0039
Mitchell Williams, S. (1999). Voluntary environmental and social accounting disclosure practices in the Asia-Pacific region: An international empirical test of political economy theory. International Journal of Accounting, 34(2).
Muneeza, A., Ma’ruf, A., & Alam, S. (2020). CSR Contribution to Socio-Economic Development: Evidence from Indonesian Islamic Banks. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 3(1), 13–26. https://doi.org/10.12928/ijiefb.v3i1.949
Nahar, F. H., Faza, C., & Azizurrohman, M. (2020). Macroeconomic Analysis and Financial Ratios on Sharia Commercial Bank Profitability: A Case Study of Indonesia. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 3(1), 37–49. https://doi.org/10.12928/ijiefb.v3i1.1721
Sellami, Y. M., & Tahari, M. (2017). Factors influencing compliance level with AAOIFI Financial accounting standards by Islamic banks. Journal of Applied Accounting Research, 18(1), 137–159. https://doi.org/10.1108/JAAR-01-2015-0005
Singh, M., Mathur, I., & Gleason, K. C. (2004). Governance and Performance Implications of Diversification Strategies: Evidence from Large U.S. Firms. The Financial Review, 39(4), 489–526. https://doi.org/10.1111/j.0732-8516.2004.00086.x
Slater, D. J., Dixon-fowler, H. R., Slater, B. D., & Dixon-fowler, H. R. (2009). CEO International Assignment Experience and Corporate Social Performance. Journal of Business Ethics, 89(3), 473–489. https://doi.org/10.1007/sl0551-008-0011-y
Srairi, S. (2019). Transparency and bank risk-taking in GCC Islamic banking. Borsa Istanbul Review, 19, S64–S74. https://doi.org/10.1016/j.bir.2019.02.001
Thompson, K. W., & Gastil, R. D. (1982). Freedom in the World: Political Rights and Civil Liberties, 1981. Human Rights Quarterly, 4(4), 538. https://doi.org/10.2307/762216
Vinnicombe, T. (2010). AAOIFI reporting standards: Measuring compliance. Advances in Accounting, 26(1), 55–65. https://doi.org/10.1016/j.adiac.2010.02.009
Wibowo, M. G. (2020). Good Public Governance in Islamic Perspective: An Analysis on the World Governance Indicator in OIC Member Countries. Ihtifaz: Journal of Islamic Economics, Finance, and Banking, 3(1), 51–65. https://doi.org/10.12928/ijiefb.v3i1.1718
Downloads
Published
2020-12-31
Issue
Section
Articles
License
License and Copyright Agreement
In submitting the manuscript to the journal, the authors certify that:
- They are authorized by their co-authors to enter into these arrangements.
- The work described has not been formally published before, except in the form of an abstract or as part of a published lecture, review, thesis, or overlay journal. Please also carefully read Ihtifaz, Journal of Islamic Economics, Finance, and Banking Posting Your Article Policy at http://journal2.uad.ac.id/index.php/ijiefb/about/submissions#onlineSubmissions
- That it is not under consideration for publication elsewhere,
- That its publication has been approved by all the author(s) and by the responsible authorities “tacitly or explicitly“ of the institutes where the work has been carried out.
- They secure the right to reproduce any material that has already been published or copyrighted elsewhere.
- They agree to the following license and copyright agreement.
Copyright
Authors who publish with Ihtifaz, Journal of Islamic Economics, Finance, and Banking agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License (CC BY-SA 4.0) that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
_1.png){kind=logo}
