Articlehybrid2016

The Influence of CSR Practices on Financial Performance: Evidence From Islamic Financial Institutions in Indonesia

Firman Menne · Lanita Winata · Mohammad Sharif Hossain

16 citations0/0 files storedJournal of Modern Accounting and Auditing

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Islamic Finance and Banking Studies Corporate Social Responsibility Reporting Corporate Governance and Financial Management

Abstract

The emergence of Islamic Financial Institutions (IFIs) is expected to provide enormous benefits for the Muslims community in Indonesia such as the availability of IFIs based on Sharia law and the implementation of Islamic value in the community.Like Corporate Social Responsibility (CSR) practices in all business organizations, the IFI's CSR becomes one of the important factors in improving organizational performance.The implementation of CSR in IFIs is unique as it is based on Sharia law.Zakat and Qardh are the uniqueness of IFI's CSR practices.There are many studies which have investigated the relationship of Zakat and Qardh on organizational performance in Arabic and Muslim countries.As Muslim countries, Islamic laws including providing Zakat and Qardh are practices of every business organization.Indonesia is not a Muslim country, Zakat and Qardh are only required for IFIs as part of CSR practices.This study aims to analyze the influence of CSR practices on the financial performances of IFIs in Indonesia using gender as a control variable.The samples of this research were taken from the annual reports of nine Islamic banks for the period of 2010-2014.Regression method was used to analyze and test hypotheses.The results of this research indicate that the relationship between CSR practices and financial performance is significant, the value of R is 0.737, and R square is 0.543.This means that the implementation of CSR practices (Zakat and Qardh) improves organizational financial performances of IFIs in Indonesia.This study also has a limitation as it only focuses on Zakat and Qardh; thus in the future, it is necessary to advance the variable of CSR practices on the real social and environmental practices such as environmental improvement, increasing the quality of human resources, involving in any jobs or reducing unemployment and any other activities.

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References

1979A Three-Dimensional Conceptual Model of Corporate Performance 2003Corporate Social and Financial Performance: A Meta-Analysis 2004Corporate Social Responsibility Theories: Mapping the Territory 1984Corporate Social Responsibility and Financial Performance 2004Corporate Social Responsibility and Marketing: An Integrative Framework 2010Managing corporate performance 2000Islamic Corporate Reports 2008What Does Islam Say about Corporate Social Responsibility

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