Shari'ah disclosures in Malaysian and Indonesian Islamic banks

Wan Amalina Wan Abdullah · Majella Percy

100 citations0/0 files storedJournal of Islamic accounting and business research

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Islamic Finance and Banking Studies Auditing, Earnings Management, Governance Corporate Social Responsibility Reporting

Abstract

Purpose – The paper aims to contribute to the discussion on Shari'ah governance systems by examining the extent of disclosure on the Shari'ah Supervisory Board (SSB) as well as the content of the Board's report in the annual reports of 23 Islamic banks in Malaysia and Indonesia. The paper also investigates the disclosures about zakat (Islamic levy). Design/methodology/approach – The study is a cross-sectional analysis of annual report disclosures in the year 2009. The paper uses both disclosure indices and content analysis to measure the extent of disclosures about SSB and zakat. The paper also tests hypotheses examining the relationship between SSB characteristics and the extent of the SSB-related and zakat disclosures. Findings – The results indicate that SSB-related and zakat disclosures are still limited, with only four banks disclosing more than half of the SSB Index. What is noticeable is the low level of disclosure on sensitive matters. Among the factors associated with SSB-related disclosures are cross-membership with other SSBs and the expertise of SSB members in accounting, banking, economics or finance . Originality/value Originality/value – The study is the first to provide an in-depth analysis of Shari'ah disclosures in Malaysian and Indonesian Islamic banks. As such, this study makes an important contribution to the debate on Shari'ah governance systems and has implications for regulators and standard setters. The Malaysian and Indonesian standard setters could play an important role in ascertaining appropriate disclosure requirements relating to the SSB as the study suggests that the level of disclosure is less than expected. The evidence also suggests the need for mandatory enforcement of standards on these types of disclosures.

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References

2002Introduction 1995Corporate social and environmental reporting 1989Corporate Social Reporting: A Rebuttal of Legitimacy Theory 2004The Effect of Audit Committee Expertise, Independence, and Activity on Aggressive Earnings Management 1987The impact of corporate characteristics on social responsibility disclosure: A typology and frequency-based analysis 2008Islamic banking: Interest-free or interest-based?2007Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports 2003The Association between Audit Committee Characteristics and Audit Fees

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2019Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries 2020Does sharia governance influence corporate social responsibility disclosure in Indonesia Islamic banks?2019Does Shariah committee composition influence Shariah governance disclosure?2020Shariah governance in Islamic banks: Practices, practitioners and praxis 2020The impact of the Shariah Board’s characteristics on the financial soundness of Islamic banks

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