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Does stakeholder pressure matter in Islamic banks’ corporate social responsibility and financial performance?

Muhammad Ali (Graduate Business School, UCSI University, Kuala Lumpur, Malaysia)
Sadia Mehfooz Khan (Department of Business Administration, IQRA University, Karachi, Pakistan)
Chin-Hong Puah (Department of Economics, Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan, Malaysia)
Muhammad Shujaat Mubarik (College of Business Management, Institute of Business Management, Karachi, Pakistan)
Muhammad Ashfaq (IUBH University of Applied Sciences, Munich, Germany)

International Journal of Ethics and Systems

ISSN: 2514-9369

Article publication date: 20 May 2022

Issue publication date: 18 April 2023

754

Abstract

Purpose

This study aims to examine the impact of stakeholder pressure on Islamic banks’ corporate social responsibility (CSR) practices and financial performance.

Design/methodology/approach

A close-ended questionnaire was collected from 282 Islamic bank’s branch managers. Partial least square structural equation modeling was used to test the hypothesized model. Both measurement and structural models were found to be fit for this research.

Findings

Results indicate that all components of stakeholder pressure (management, client, competitor, Sharia advisory board and community) have a significant positive impact on Islamic CSR. The findings of this study further revealed that Islamic CSR is a significant predictor of bank’s financial performance. Based on the present empirical results, this study suggests that Islamic bank managers should develop the best CSR practices to gain a competitive advantage and sustainable financial performance.

Originality/value

Overall, this study contributes significantly to the Islamic bank CSR literature. However, to the best of the authors’ knowledge, few studies have been conducted to establish a link between firm performance and CSR in Islamic banks using a comprehensive model of stakeholder pressure.

Keywords

Acknowledgements

Conflict of interest: The corresponding author states that there is no conflict of interest on behalf of all authors.

The authors are grateful to the journal’s anonymous referees for their extremely useful suggestions to improve the quality of the paper.

Citation

Ali, M., Khan, S.M., Puah, C.-H., Mubarik, M.S. and Ashfaq, M. (2023), "Does stakeholder pressure matter in Islamic banks’ corporate social responsibility and financial performance?", International Journal of Ethics and Systems, Vol. 39 No. 2, pp. 236-263. https://doi.org/10.1108/IJOES-10-2021-0183

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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