Article2020

Ethical values and bank performance: evidence from financial institutions in Malaysia

Tuan Azma Fatiema Tuan Ibrahim · Hafiza Aishah Hashim · Akmalia Mohamad Ariff

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

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

Abstract

Purpose The purpose of this study is to investigate the relationship between ethical values and performance in the context of the banking sector in Malaysia. Design/methodology/approach Based on the philanthropic model, this study posits that firms undertakingzakatand charity are ethical firms. Zakat disclosure index (ZDI) and charity disclosure index (CDI) were constructed to measure ethical values. This study hypothesises that ethical values are positively associated with bank performance. Ethical values (i.e. CDI and ZDI) and financial performance data (i.e. return on assets) were collected from the disclosures made in the annual reports of 50 banks for a period of five years (2010-2014). Findings A positive association was found betweenzakatdisclosure and bank performance. The results indicate that higherzakatdisclosure is associated with greater bank performance. However, no relationship was found between charity disclosure and bank performance. Research limitations/implications Considering the limitation of the index used in this study, other dimensions such as corporate governance, sustainability, products and environment can be considered in the development of index to measure ethical values in future studies. Originality/value This study offers additional explanation on the relationship between ethical values and performance by examining the role ofzakatdisclosures that characterize the unique aspects of Malaysian companies.

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1990WHAT'S IN A NAME? REPUTATION BUILDING AND CORPORATE STRATEGY.1988CORPORATE SOCIAL RESPONSIBILITY AND FIRM FINANCIAL PERFORMANCE.2013Islamic vs. conventional banks: Business models, efficiency and stability 2008Does it pay to be different? An analysis of the relationship between corporate social and financial performance 2009Is doing good good for you? how corporate charitable contributions enhance revenue growth 2007Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports 2006Corporate philanthropic practices 2007Too Little or Too Much? Untangling the Relationship Between Corporate Philanthropy and Firm Financial Performance

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