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

Tuan Azma Fatiema Tuan Ibrahim, Hafiza Aishah Hashim and Akmalia Mohamad Ariff

Journal of Islamic Accounting and Business Research, 2020, vol. 11, issue 1, 233-256

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.

Keywords: Ethical values; Financial performance; Zakat; Charity (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-11-2016-0139

DOI: 10.1108/JIABR-11-2016-0139

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