Determinants of Corporate Social Responsibility Disclosure: The Case of Islamic Banks
Journal of Islamic Accounting and Business Research, Vol. 2 No. 2, 2011
28 Pages Posted: 14 Oct 2018
Date Written: 2011
Purpose – The purpose of this paper is to develop and test a theoretical model of the determinants of Islamic banks’ social disclosures. In testing the hypotheses, the level of social disclosure in Islamic banks’ annual reports is gauged based on a benchmark derived from Islamic principles.
Design/methodology/approach – Applying the principles of systems-oriented theories such as political economy, legitimacy and stakeholder theories, as well as agency theory, hypotheses linking Islamic social disclosure and its determinants are developed. The sample comprised 47 Islamic banks in 14 countries and the data related to the dependent (Islamic banks social disclosures) variable are collected mainly from the annual reports, while data for the independent variables (determinants) are collected from various sources. Regression analysis was conducted to test the hypotheses.
Findings – Corporate social responsibility (CSR) disclosure by Islamic banks varies signiﬁcantly across the sample. According to the regression results, variation is best explained by the “inﬂuence of the relevant publics” and the “Shari’ah (SSB supervisory boards) corporate governance mechanism” variables. Using alternative variable measures, the regression results suggest that “level of social and political freedom” and “the proportion of investment account deposits to total assets” are also signiﬁcant determinants of Islamic banks’ CSR disclosure.
Research limitations/implications – The major limitation of this paper is the small sample size of only 47 Islamic banking institutions. Future studies may expand the sample size used here.
Practical implications – The results indicate the signiﬁcance of the SSB as a governance mechanism that may increase the CSR disclosure of Islamic banks. Thus, from a policy perspective, bodies that regulate Islamic banking should consider mandating the SSB for all “Islamic banks”.
Originality/value – This research is the ﬁrst to provide an a priori basis for CSR disclosure of Islamic banks and to test using empirical data. The ﬁndings of this research should be of signiﬁcant value to regulators, shareholders and deposit holders of Islamic banks. In a more general context, this paper is one of a few that has operationalized Gray et al.’s conception of “levels of resolution of perception” and empirically tested the concept using non-traditional organizations (Islamic banks) in a non-Western context. This adds further credibility to systems-oriented theories in explaining CSR disclosures of non-Western organizations operating in non-Western cultures.
Paper type - Research paper
Keywords: Islam, Banks, Corporate governance, Corporate social responsibility, Disclosure, Political economy, Legitimacy theory
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