Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance

Rita Wijayanti () and Doddy Setiawan
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Rita Wijayanti: Faculty of Economics and Business, Muhammadiyah University of Surakarta, Sukoharjo 57162, Indonesia
Doddy Setiawan: Faculty of Economics and Business, Sebelas Maret University, Surakarta 57126, Indonesia

Sustainability, 2022, vol. 14, issue 17, 1-25

Abstract: This study aims to explore social reporting by Islamic banks (IB) (referred to as Islamic social reporting, ISR, hereafter) through two streams, i.e., its determinants and consequences on firm performance. Using annual report data from 90 samples of the world’s IB from 2016–2020, this study focuses on the sharia governance implementation through the role of the Sharia Supervisory Board (SSB). The SSB was measured by individual characteristics and IG-Score, representing a combination of dichotomous characteristics of the SSB, which have not been encountered in previous studies. Firm performance as a consequence of disclosure was determined by a more comprehensive approach based on accounting and the stock market. The study’s findings demonstrate the SSB’s beneficial influence on ISR, suggesting that the presence of an SSB can promote ISR practices. Social reporting has been found to have a negative impact on ROA, but it has a positive impact on MTBV and Tobin’s Q. The data suggest that while voluntary reporting practices may cause a short-term decline in profitability, they can have a positive impact on an enterprise’s long-term value.

Keywords: Islamic social reporting; Sharia Supervisory Board; firm performance; Islamic bank (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:17:p:10965-:d:905016

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