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1 – 10 of over 2000Adel Sarea and Monsurat Ayojimi Salami
This paper aims to examine the level of Islamic social reporting (ISR) disclosure of Islamic banking in Gulf Cooperative Council (GCC) countries using a checklist based on…
Abstract
Purpose
This paper aims to examine the level of Islamic social reporting (ISR) disclosure of Islamic banking in Gulf Cooperative Council (GCC) countries using a checklist based on Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) standards.
Design/methodology/approach
A quantitative method – Tobit Model – is adopted in this study. The unweighted disclosure method used to measure the ISR disclosure checklist consist of 51 items in Islamic banks (IBs) in the GCC countries. The stakeholder theory and legitimacy theory are used to investigate the possible banking performance factors affecting the accounting practices such as ISR disclosure in IBs.
Findings
The findings show that the ISR disclosure index is linked to the IBs’ performance indicators in GCC countries. The result indicates both Islamic banking profitability and age establish positive and statistically significant relationship with ISR disclosure while leverage establishes significant negative relationship with ISR disclosure. This implies that Islamic banking profitability, leverage, and age are essential bank performance indicators that make ISR disclosure worthy of doing even in the presence of Islamic bank stakeholders in GCC countries. This finding linked compliance with the mandatory disclosure recommendations of AAOIFI Standard No. 7, as well as voluntary disclosure.
Research limitations/implications
This study used cross sectional data for the year 2019, which is considered more recent despite its being a year data analysis. However, future research should consider mix method as well as more analysis tools provided their number of observations are sufficient enough.
Social implications
The study identifies the factors that may enhance Islamic financial institutions, including Islamic banking in GCC countries, to comply with ISR disclosure. The application of this study supports Accounting standards setters to consider standards that support ISR disclosure in Islamic banking in different countries.
Originality/value
To the best of the authors’ knowledge, this study is novel in exploring the level of ISR disclosure in Islamic banking in GCC countries by using a checklist based on AAOIFI standard No. 7 and establishes the relationship between ISR disclosure index and IBs profitability, leverage, as well as age of Islamic banking in operation.
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Abul Hassan and Sofyan Syafri Harahap
The purpose of this paper is to explore whether any discrepancy exists between the corporate social activities disclosed in the annual reports of Islamic banks and the corporate…
Abstract
Purpose
The purpose of this paper is to explore whether any discrepancy exists between the corporate social activities disclosed in the annual reports of Islamic banks and the corporate social responsibility (CSR) disclosure index which has been developed based on the Islamic business ethics framework.
Design/methodology/approach
This paper reports on a survey of annual reports of seven Islamic banks using the method of content analysis to measure the volume of CSR disclosure.
Findings
The results show the overall mean CSR disclosure index of one Islamic bank out of seven to be above average and the issues of CSR are not of major concern for most Islamic banks.
Research limitations/implications
CSR disclosure in the Islamic banks is experimental and could be explored in greater depth in future studies.
Practical implications
The findings have important implications for academics and researchers, as they pave the ways for further investigation. The results also have important implication for Accounting and Auditing Organisation for Islamic Financial Institutions in developing a CSR reporting standard if Islamic banks are to enhance their image and reputation globally, as well as to remain competitive.
Originality/value
The paper contributes to the growing debate on CSR in ethical perspective and key underlying issues associated with the emergence of new disclosure practices for Islamic financial institutions. Through this paper, new visibilities explored, and competing dilemmas opened up.
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Moutaz Abojeib, Mohammad Ghaith Mahaini and Mhd Osama Alchaar
This paper aims to investigate the zakat disclosure of Islamic banks at the global level. It is important for depositors and shareholders of Islamic banks to know whether the bank…
Abstract
Purpose
This paper aims to investigate the zakat disclosure of Islamic banks at the global level. It is important for depositors and shareholders of Islamic banks to know whether the bank is paying zakat on their behalf or not. Additionally, disclosing the calculation method used is also necessary to eliminate uncertainties resulting from ambiguous reporting that can mislead the stakeholders. This issue becomes more obvious when considering that depositors and shareholders may have different accounts with different Islamic banks, which makes it quite confusing to have multiple ways of zakat calculation or different approaches on who is the party that pays it. This study analyzes the current practices across 13 countries and recommends best practices.
Design/methodology/approach
The objective of the paper objective is achieved through analyzing the annual reports of 34 Islamic banks in 13 countries for the years 2014 and 2019. It further quantifies the zakat disclosure by constructing a zakat disclosure index. This index considers the disclosure of four major constituents covering the amount and the responsibility for payment, the calculation method, the involvement of the Shariah board and the zakat duty on investment account holders. For further robustness, this study is further supported by content analysis measures using the zakat word count in annual reports.
Findings
The results indicate a major issue in zakat disclosure. The overall average of disclosure index is low. Most of the banks disclose limited information about zakat, such as the amount and the responsibility for payment, in their annual reports. Less than 40% of the examined banks disclose information about the role of the Shariah board in zakat calculation, and a very limited number of banks (9%) are found to disclose enough details about the zakat calculation method. Furthermore, none of the examined banks mentions the zakat due for the investment accounts. Overall, zakat disclosure of most of the banks, whether following Accounting and Auditing Organization for Islamic Financial Institutions or otherwise, are found to be not up to the expected best practices.
Research limitations/implications
Among the limitations of this study is the sole dependence on annual reports of Islamic banks without considering other means that banks might be using to communicate zakat-related matters to stakeholders. Examples of such means include a website, social media and other direct or indirect marketing materials. Additionally, the results of this study shall not be overgeneralized regarding differences between countries because the sample does not include all Islamic banks in the selected country. Future research may use the proposed zakat disclosure index on a country-specific data sample.
Practical implications
The findings have significant implications as they raise a serious concern regarding the sufficiency of the Islamic banks’ disclosure about a core area of their responsibility, that is, the zakat. The index developed can be a tentative measure of zakat disclosure transparency pending further review. The result further suggests looking at the composition of members of Shariah boards to include at least one member with a sound accounting background. Zakat is a religious duty; therefore, a perceived lack of transparency on the amount, method of calculation and how the zakat is paid may affect the future injection of capital into Islamic banks.
Originality/value
An important contribution of this paper lies in the fact that the collected data is not provided in any available database. Rather, it is manually captured from the individual annual reports of reviewed Islamic banks. Further, this paper proposes an index to measure the zakat disclosure at bank and country levels.
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Agung Nur Probohudono, Astri Nugraheni and An Nurrahmawati
The purpose of this study is to analyze the impact of corporate social responsibility (CSR) disclosure on the financial performance of Islamic banks across nine countries as major…
Abstract
Purpose
The purpose of this study is to analyze the impact of corporate social responsibility (CSR) disclosure on the financial performance of Islamic banks across nine countries as major markets that contribute to international Islamic bank assets (Indonesia, Malaysia, Saudi Arabia, UAE, Kuwait, Qatar, Turkey, Bahrain and Pakistan or further will be called QISMUT + 3 countries).
Design/methodology/approach
Islamic Social Reporting Disclosure Index (ISRDI) is being used as a benchmark for Islamic bank CSR performance that contains a compilation of CSR standard items specified by the Accounting and Auditing Organization for Islamic Financial Institutions. The secondary data is collected from the respective bank’s annual reports and it used the regression analysis techniques for statistical testing.
Findings
This study found that CSR disclosure measured by ISRDI has a positive effect on financial performance. Almost all ISRDI sub-major categories have a positive effect on financial performance except the “environment” subcategory. The highest major subcategory for ISRDI is the “corporate governance” category (82%) and the “environment” category (13%) is the lowest. For the UAE, Kuwait and Turkey, the ISRDI is positively affected by financial performance and the other countries on this research are not.
Originality/value
This study highlighted the economic benefits of social responsibility practices as a part of business ethics in nine countries that uphold the value of religiosity. Thus, the development of the results of this research for subsequent research is very wide open.
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Mohamed Anouar Gadhoum, Zulkarnain Bin Muhamad Sori, Shamsher Ramadilli and Ziyaad Mahomed
This paper aims to assess the ethical disclosure of Islamic banks (IBs) under different accounting regimes and to ascertain whether the adoption of an Islamic accounting standards…
Abstract
Purpose
This paper aims to assess the ethical disclosure of Islamic banks (IBs) under different accounting regimes and to ascertain whether the adoption of an Islamic accounting standards (Auditing Organization for Islamic Financial Institutions [AAOIFI]) promotes the practice of ethical disclosure.
Design/methodology/approach
An ethical identity disclosure index was developed to serve as a benchmark to assess the level of the communicated ethical identity disclosure (CEID) of 47 IBs over 18 countries using annual reports.
Findings
The findings suggest that, overall, there is poor ethical disclosure practices and even banks that had some initiatives towards disclosures had no proper reference to benchmark for effective implementation of ethical reporting standards and had no plans for ethical and socially responsible schemes. There was no evidence to suggest that IBs that adapted the religious-based accounting regime (AAOIFI) had better levels of ethical disclosure.
Research limitations/implications
Though poor practices of CEID are expected to increase reputational risks and the likelihood of loss of religious conscious customers and investors’ confidence and therefore market share and performance in the long-term, the current practice does not concur with this expectation. Furthermore, since there is no evidence to support the notion that the adoption of AAOIFI standards would support greater initiatives towards level of ethical identity disclosures, a mandatory requirement for effective disclosure through enforcement of AAOIFI’s financial reporting standards, specifically with regard to ethics and social and environmental commitment is needed.
Practical implications
In addition to introducing commonly accepted regulatory and supervisory guidelines and best practices that cater for the specificities of Islamic banking could significantly improve the level of CEID of IBs. In addition, the standardization of ethical (non-financial) reporting practices of IBs through guidelines and key performance indicators will facilitate CEID practices of IBs.
Originality/value
This paper contends that for Islamic bankers, ethics is an entrenched part of the business practice and should mitigate unethical behaviour, more so with the additional filter of Sharīʿah supervisory boards. Even if there are such practices due to ineffectiveness of Sharīʿah committees, management pressure to meet performance expectations and competitive pressures from peers in the conventional banking sector, it will not be in the interest of the banks to report them.
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Rihab Grassa, Sherif El-Halaby and Khaled Hussainey
This chapter assesses the effects of corporate governance (CG) variables on the level of Corporate Social Responsibility Disclosure (CSRD), Shari'ah Supervisory Board Disclosure…
Abstract
This chapter assesses the effects of corporate governance (CG) variables on the level of Corporate Social Responsibility Disclosure (CSRD), Shari'ah Supervisory Board Disclosure (SSBD), and Financial Disclosure (FD) for Islamic banks. This study, based on a sample of 95 Islamic banks, assessed this in 2013. The findings suggest that CG mechanisms, firm's age, auditor and shari'ah auditing department are effective in influencing SSBD, CSRD, and FD practices in Islamic banks. This chapter encourages regulators to improve CG mechanisms in their Islamic banking systems through the optimization of ownership structure (dispersed ownership) and the board's characteristics in order to promote transparency and disclosure. Moreover, the findings support theoretical arguments that firms disclose CG information in order to mitigate information asymmetry and agency costs and to improve investor confidence in the reported financial statements. The empirical evidence of this study enhances the understanding of the CG disclosure environment in Islamic banks as a promoting new financial system.
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Peni Nugraheni and Erlinda Nur Khasanah
The purpose of this study is to discuss the extent to which Indonesian Islamic banks (IBs) disclose corporate social responsibility (CSR) according to the Accounting and Auditing…
Abstract
Purpose
The purpose of this study is to discuss the extent to which Indonesian Islamic banks (IBs) disclose corporate social responsibility (CSR) according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) index. It also empirically examines the determinants of CSR disclosure in Indonesian IBs, based on disclosure from AAOIFI index, which is based on Islamic principles.
Design/methodology/approach
The determinant used in this paper is the corporate governance (CG) mechanism, which focuses on the board of commissioners (BOC) and Sharia Supervisory Board (SSB) and their characteristics. The paper uses multiple regression analysis to examine the influence of these variables on CSR.
Findings
The results indicate that the level of CSR disclosure of IBs measured by the AAOIFI index continues to be low. The statistical results reveal that CSR disclosure has an insignificant relationship with BOC size and SSB qualifications, while the other results show a negative association between the composition of independent BOCs and CSR disclosure, and the frequency of BOC and SSB meeting has a positive effect on this.
Research limitations/implications
The study focuses on Indonesian IBs. The variables of the CG mechanism are limited to the BOC and SSB, while the BOC exists only in countries that adopt two-tier boards.
Practical implications
IBs should provide a wider range of information to be disclosed. The government should establish specific items that need to be disclosed by IBs, considering there are no specific CSR disclosure regulations for IBs in Indonesia.
Originality/value
This study uses the AAOIFI index, which may be a suitable measure of CSR in IBs. The study also analyzes why certain items in the index have a high disclosure level and others do not.
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The purpose of this study is to measure the extent of voluntary disclosure in the 2009 annual reports of 108 Shariah‐compliant companies listed on the Kuwait Stock Exchange. The…
Abstract
Purpose
The purpose of this study is to measure the extent of voluntary disclosure in the 2009 annual reports of 108 Shariah‐compliant companies listed on the Kuwait Stock Exchange. The study aims to investigate three categories of voluntary disclosure: overall, conventional and Islamic disclosure.
Design/methodology/approach
Voluntary disclosure was measured using a self‐constructed index consisting of 132 items overall, 86 for conventional and 46 for Islamic information items. Annual reports were analyzed using descriptive statistics and t‐tests.
Findings
Results suggest that the mean overall voluntary disclosure by Shariah‐compliant companies is 15 percent, but 17 percent and 13 percent for the conventional and Islamic items, respectively. Voluntary disclosure of conventional items is comparable to extant studies, and higher than Islamic items.
Research limitation/implications
The study uses annual reports from 2009 because they were the most recent data available on the listed companies at the beginning of the study. Since this study was undertaken before the Shariah Advisory Council of the Capital Market Authority was established on January 1, 2012, this imposes a limitation. Future study should replicate this study to assess differences with the existence of the Council.
Practical implications
The findings provide evidence that Shariah‐complaint companies lack voluntary disclosure, especially Islamic disclosure information. As a result, the findings should be useful to lawmakers in Kuwait for improving overall disclosure practices by Shariah‐compliant companies. Preparers may use the findings to match the amount of information in their annual reports with other companies to ensure capital sourcing. Investors may use the findings for understanding disclosure behavior of Shariah‐compliant companies in Kuwait. Such findings may assist them to diversify investment portfolios.
Originality/value
This study contributes to extending the Kuwaiti literature on disclosure, and fills a gap in empirical studies on Shariah‐compliant disclosure practices.
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Sherif El-Halaby, Khaled Hussainey and Abdullah Al-Maghzom
The authors measure the impact of culture on Sharia; Social and Financial Disclosure (SSFD) of Islamic Banks (IBs) around the world.Content analysis is used to measure levels of…
Abstract
The authors measure the impact of culture on Sharia; Social and Financial Disclosure (SSFD) of Islamic Banks (IBs) around the world.
Content analysis is used to measure levels of disclosure for a sample of 136 IBs of 25 countries for years 2013 and 2014. Different cultural measures are used. These include secrecy/transparency as suggested by Gray (1988) and Hofstede (1980, 1983, 2001, 2010)’s culture dimensions which include: Power Distance; Individualism; Masculinity; Uncertainty Avoidance; Long-Term Ordination and Indulgence. Ordinary least square (OLS) regression is used to test the research hypotheses.
After controlling bank-specific, corporate governance and country characteristics, the authors found that Hofstede’s culture dimensions have a significant impact on SSFD. They also found that Gray's transparency dimension positively influence levels of sharia, social and aggregated disclosure. Therefore, they conclude that culture influences levels of disclosure in IBs.
This study has policy implications for managers and regulators of Islamic banking industry.
This study is the first to use both Gray and Hofstede models in the context of IBs around the world. It also the first to explore the impact of culture on three different disclosure levels for IBs.
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Mohd Shukor Harun, Khaled Hussainey, Khairul Ayuni Mohd Kharuddin and Omar Al Farooque
This study aims to explore the corporate social responsibility disclosure (CSRD) practices of the Islamic banks in the Gulf Cooperation Council (GCC) countries during the period…
Abstract
Purpose
This study aims to explore the corporate social responsibility disclosure (CSRD) practices of the Islamic banks in the Gulf Cooperation Council (GCC) countries during the period 2010-2014 and examines the determinants of CSRD and its effects on firm value.
Design/methodology/approach
Based on the Accounting and Auditing Organization for Islamic Financial Institutions Governance Standard No. 7 guidelines and using content analysis, the paper develops a comprehensive CSRD index for GCC Islamic banks. The study applies ordinary least squares regression analysis for hypothesis testing and for finding determinants of respective dependent variables.
Findings
The results show a very low level of CSRD among the sample Islamic banks in GCC countries. When using corporate governance characteristics to examine the determinants of CSRD, this study provides evidence of a significant positive association between board size and CSRD practice in Islamic banks and a significant negative relationship of chief executive officer (CEO) duality with CSRD, as per expectation. For the economic consequences of CSRD, the study documents an inverse performance effect of CSRD while board size, board composition and CEO duality indicate significant positive effects on firm value.
Research limitations/implications
The relatively small sample size of GCC Islamic banks may limit the application of the findings to other Islamic financial institutions such as Takaful and the Islamic unit trust company.
Practical implications
The findings of this study initiate the global debate on the need for corporate governance reform in Islamic banks by providing insights on the role played by corporate governance mechanisms in encouraging and enhancing CSRD practices among Islamic banks. The findings also have important implications for investors, managers, regulatory bodies, policymakers and Islamic banks in the GCC countries.
Social implications
The results of the study do not support the idea that Islamic banks operating on Islamic principles can meet their social responsibilities through promoting corporate social responsibility (CSR) activities and by differentiating themselves from non-Islamic banks.
Originality/value
This is the first study to examine the determinants of CSRD in GCC Islamic banks using comprehensive CSRD and corporate governance variables and, therefore, adds value to the existing CSR literature in banking.
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