Corporate Governance Disclosure in the Annual Report: An Exploratory Study on Indonesian Islamic Banks

27 Pages Posted: 9 Nov 2011

See all articles by Salim Darmadi

Salim Darmadi

Indonesia Financial Services Authority (OJK)

Date Written: November 8, 2011

Abstract

Due to their different characteristics, banks are expected to report the features of their corporate governance in the corporate report. This paper is aimed to explore disclosure on corporate governance mechanisms in annual reports of Islamic commercial banks in Indonesia. Corporate governance mechanisms addressed in this study include the Shariah Supervisory Board, the Board of Commissioners, the Board of Directors, board committees, internal control and external audit, and risk management. Employing a sample comprising seven Islamic commercial banks in Indonesia, the present study constructs the so-called Corporate Governance Disclosure Index (CGDI) to score the banks’ disclosure level. It is revealed that Bank Muamalat and Bank Syariah Mandiri, the county’s two largest and oldest Islamic commercial banks, score higher than their peers. Disclosure of the sample banks on some dimensions, such as board members and risk management, is found to be strong. On the other hand, disclosure on internal control and board committees tends to be weak. The result of this study may have some important implications for the enhancement of corporate governance disclosure of Islamic banks, thereby wider acceptance and enhanced reputation could be gained.

Keywords: Corporate governance, disclosure, Indonesia, Islamic banks

JEL Classification: G21, G28, G34, M41

Suggested Citation

Darmadi, Salim, Corporate Governance Disclosure in the Annual Report: An Exploratory Study on Indonesian Islamic Banks (November 8, 2011). Available at SSRN: https://ssrn.com/abstract=1956254 or http://dx.doi.org/10.2139/ssrn.1956254

Salim Darmadi (Contact Author)

Indonesia Financial Services Authority (OJK) ( email )

Jalan M.H. Thamrin No. 2
Jakarta, Jakarta 10350
Indonesia

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