To read this content please select one of the options below:

Determinants of Islamic social reporting disclosure and its effect on firm’s value

Arik Susbiyani (Department of Accounting, Universitas Muhammadiyah Jember, Jember, Indonesia)
Moh Halim (Department of Accounting, Universitas Muhammadiyah Jember, Jember, Indonesia)
Animah Animah (Department of Accounting, Universitas Mataram, Mataram, Indonesia)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 22 September 2022

Issue publication date: 15 March 2023

596

Abstract

Purpose

This paper aims to examine the effect of the independent board of commissioners and profitability on Islamic social reporting (ISR) disclosure implemented in companies that belong to the group category of Indeks Saham Syariah Indonesia (ISSI). This study also examined the advanced effect of ISR disclosure as a company strategy to obtain a firm’s value.

Design/methodology/approach

The data of the independent board of commissioners, profitability, ISR disclosure and firm’s value were obtained from the annual reports of companies whose shares belong to the calculation of ISSI, totaling 24 companies. The ISR disclosure was measured using the content analysis method. While the research model used path analysis.

Findings

This study found that the independent board of commissioners directly affects the ISR disclosure while indirectly affects the firm’s value as mediated by the ISR disclosure. This finding indicates that the independent board of commissioners is regarded as capable of protecting investors’ interests from problems that may be incurred from asymmetry information. However, this study failed to prove that profitability directly affects the ISR disclosure.

Research limitations/implications

A list of ISR disclosure items in this research adopted the list developed by Haniffa and Othman, without any additional items. While the measurement of ISR disclosure used the content analysis, therefore there may be subjectivity issues accidentally done while scoring.

Practical implications

This study recommends management of companies which belong to ISSI to optimize their independent board of commissioners because it has been proven in this study that their presence can significantly encourage a more independent, objective and fair climate while one of its main principles is to pay attention to the interests of minority shareholders and other stakeholders. Besides, the findings can be used to increase awareness of the company management about the importance of transparency in managing a company because the ISR disclosure has received positive responses from investors.

Social implications

The findings of this study encourage companies to be more transparent in presenting information. An appropriate disclosure will provide a sense of security so that the investors can account for such earthly issues before Allah SWT, thus their spiritual satisfaction can be achieved.

Originality/value

This paper investigated further the effect of ISR disclosure on firm’s value which has never been performed by previous scholars. The ISR disclosure is a strategy to obtain legitimacy from investors, which was analyzed using the legitimacy theory.

Keywords

Citation

Susbiyani, A., Halim, M. and Animah, A. (2023), "Determinants of Islamic social reporting disclosure and its effect on firm’s value", Journal of Islamic Accounting and Business Research, Vol. 14 No. 3, pp. 416-435. https://doi.org/10.1108/JIABR-10-2021-0277

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

Related articles