Islamic Social Reporting (ISR), Sharia Supervisory Board (SSB), and Financial Performance: Empirical Evidence on Islamic Banks in the GCC Region
Abstract
This study aims to determine the relationship between the disclosure of Islamic social
reporting (ISR), the Sharia Supervisory Board (SSB), and the financial performance of
Islamic banks in the Gulf Cooperation Council (GCC) region. The Islamic banks that
were the sample of the study totaled 25 banks spread across Bahrain, Kuwait, Qatar,
Saudi Arabia and the United Arab Emirates with a sample period starting from 2013 to
2017. This research uses multiple regression testing and is complemented by content
analysis. The results of content analysis show that the average level of ISR disclosure in
Islamic banks in the GCC area is 56.53%. That is, the issues of social responsibility have
not become a major concern for most Islamic banks. Furthermore, based on the test
results, the ISR disclosure level proved to have a positive effect on financial performance.
In addition, the existence of SSB in Islamic banks is also proven to have a positive
association with financial performance which is proxied by return on average assets.
These findings indicate that there are special things in Islamic banking such as disclosure
of ISR and SSB that can have a good impact on the financial performance of Islamic
banks.
Downloads
References
J. Suteja, A. Gunardi, and A. Mirawati, “Moderating effect of earnings management on the relationship between
corporate social responsibility disclosure and profitability of banks in Indonesia,” Int. J. Econ. Financ. Issues,
vol. 6, no. 4, pp. 1360–1365, 2016, [Online]. Available: https://dergipark.org.tr/en/pub/ijefi/issue/32045/354652
S. Maqbool and M. N. Zameer, “Corporate social responsibility and financial performance: An empirical
analysis of Indian banks,” Futur. Bus. J., vol. 4, no. 1, pp. 84–93, 2018, doi: 10.1016/j.fbj.2017.12.002.
W. Ratna, B. Cinintya, I. Fakhruddin, and H. Wibowo, “Do the characteristics of sharia supervisory board affect
the disclosure of Islamic social reporting ?,” J. Islam. Financ. Account., vol. 6, no. 1, pp. 1–20, 2023, doi:
22515/jifa.v6i1.5684.
T. Bagh, M. A. Khan, T. Azad, and M. Atif Khan, “The Corporate Social Responsibility and Firms’ Financial
Performance: Evidence from Financial Sector of Pakistan,” Int. J. Econ. Financ. Issues, vol. 7, no. 2, pp. 301–
, 2017, [Online]. Available: http:www.econjournals.com
R. Othman, A. M. Thani, and E. K. Ghani, “Determinants Of Islamic Social Reporting Among Top Shariah -
Approved Companies In Bursa Malaysia,” Res. J. Int. Stud., vol. 12, no. 12, pp. 4–20, 2009.
R. E. Freeman and L. R. David, “Stockholders and Stakeholders: A New Perspective on Corporate Governance,”
Calif. Manage. Rev., vol. 25, no. 3, pp. 88–106, 1983, doi: 10.2307/41165018.
V. Grougiou, S. Leventis, E. Dedoulis, and S. Owusu-Ansah, “Corporate social responsibility and earnings
management in U.S. banks,” Account. Forum, vol. 38, no. 3, pp. 155–169, 2014, doi:
1016/j.accfor.2014.05.003.
N. Sun, M. Habbash, A. Salama, and K. Hussainey, “Corporate environmental disclosure and earnings
management: UK evidence,” Manag. Audit. J., vol. 25, no. 7, pp. 679–700, 2010.
I. Khan and S. N. Zahid, “The impact of Shari’ah and corporate governance on Islamic banks performance:
evidence from Asia,” Int. J. Islam. Middle East. Financ. Manag., vol. 13, no. 3, pp. 483–501, 2020, doi:
1108/IMEFM-01-2019-0003.
M. S. Ashraf, N. B. e Remili, and N. B. A. Bakar, “Do Shariah Governance Attributes Impact the Islamic Banks’
Performance? Evidence from Pakistan,” Int. J. Acad. Res. Accounting, Financ. Manag. Sci., vol. 12, no. 4, pp.
–115, 2022, doi: 10.6007/ijarafms/v12-i4/15863.
A. Khalil and S. Chihi, “Would Meetings Between the Board of Directors and the Shariah Supervisory Board
Affect the Financial Performance of Islamic Banks?,” J. Int. Acad. Case Stud., vol. 26, no. 6, pp. 1–8, 2020.
N. M. Nomran, R. Haron, and R. Hassan, “Shari’Ah Supervisory Board Characteristics Effects on Islamic
Banks’ Performance: Evidence from Malaysia,” Int. J. Bank Mark., vol. 7, no. 2, pp. 1–18, 2020, doi:
2139/ssrn.3598723.
S. Neifar, B. Salhi, and A. Jarboui, “The moderating role of Shariah supervisory board on the relationship
between board effectiveness, operational risk transparency and bank performance,” Int. J. Ethics Syst., vol. 36,
no. 3, pp. 325–349, 2020, doi: 10.1108/IJOES-09-2019-0155.
M. K. Alam, S. A. Rahman, M. I. Tabash, O. A. Thakur, and S. Hosen, “Shariah supervisory boards of Islamic
banks in Bangladesh: expected duties and performed roles and functions,” J. Islam. Account. Bus. Res., vol. 12,
no. 2, pp. 258–275, 2021, doi: 10.1108/JIABR-02-2020-0035.
L. Afiska, D. F. Handayani, and V. Serly, “Pengaruh Karakteristik Dewan Pengawas Syariah (DPS) Terhadap
Kinerja Keuangan Bank Umum Syariah Yang Terdaftar pada Otoritas Jasa Keuangan (OJK) Indonesia,” J.
Eksplor. Akunt., vol. 3, no. 4, pp. 784–798, 2021, doi: 10.24036/jea.v3i4.429.
Z. A. Aribi, T. Arun, and S. Gao, “Accountability in Islamic financial institution: the role of the Shari’ah
supervisory board reports,” Financ. Account. Stand. Board - FASB, vol. 15, no. 11, pp. 154–157, 2018, doi:
1108/ JIABR-10-2015-0049.
A. Z. H. Khadijatul, R. A. Siregar, Sugianto, I. Muda, and Rahmat, “Islamic Corporate Governance and
Financial Performance in Companies Listed in JII,” Int. J. Econ., vol. 1, no. 1, pp. 248–256, 2022, doi:
55299/ijec.v1i1.100.
Y. Kim, M. S. Park, and B. Wier, “Is Earnings Quality Associated with Corporate Social Responsibility?,”
Account. Rev., vol. 87, no. 3, pp. 761–796, 2017, doi: 10.2308/accr-10209.
H. Jouber, “Corporate social responsibility and earnings quality: do institutional features matter?,” J. Glob.
Responsib., vol. 11, no. 1, pp. 54–92, 2020, doi: 10.1108/JGR-04-2019-0041.
R. Arshad, S. Othman, and R. Othman, “Islamic Corporate Social Responsibility, Corporate Reputation and
Performance,” Int. Sch. Sci. Res. Innov., vol. 6, no. 4, pp. 643–647, 2012, [Online]. Available:
http://search.proquest.com/docview/1349445808?accountid=26646
International Journal Of Science, Technology & Management ISSN: 2722 - 4015
R. Masruki, M. M. Hanefah, and N. A. Wahab, “Shariah Supervisory Board (SSB) and Performance of Islamic
Banks in Malaysia,” Int. J. Eng. Technol., vol. 7, no. 3, pp. 710–714, 2018.
M. Hassan, M. Sohail, and M. Rizwan, “Corporate Governance, Shariah Advisory Boards and Islamic Banks’
Performance,” Pakistan J. Islam. Res., vol. 18, no. 1, pp. 173–184, 2017.
H. Khotimah, “Pengaruh Profesionalisme SSB terhadap kinerja perbankan syariah,” Jesya (Jurnal Ekon. Ekon.
Syariah), vol. 2, no. 2, pp. 155–163, 2019, doi: 10.36778/jesya.v2i2.76.
H. Ajili and A. Bouri, “Assessing the moderating effect of Shariah Board on the relationship between financial
performance and accounting disclosure,” Eletronic Libr., vol. 44, no. 5, p. .570-589, 2018, doi: 10.1108/MF-05-
-0192.
R. Fitriana, A. Yulianto, and B. Solikhah, “Are characteristics of sharia supervisory boards able to improve the
performance of islamic banking?,” J. Islam. Account. Financ. Res., vol. 1, no. 1, p. 1, 2019, doi:
21580/jiafr.2019.1.1.3753.
B. C. Pratama, A. Kamaluddin, and S. Saad, “The effect of intellectual capital and shariah supervisory boards on
social performance of Islamic banks,” J. Emerg. Econ. Islam. Res., vol. 9, no. 3, p. 117, 2021, doi:
24191/jeeir.v9i3.14596.
A. A. Rahman and A. A. Bukair, “The Influence of the Shariah Supervision Board on Corporate Social
Responsibility Disclosure by Islamic Banks of Gulf Co-Operation Council Countries,” J. Manag. Res., vol. 6,
no. 2, p. 506, 2013, doi: 10.5296/jmr.v7i2.6989.
Haniffa and T. E. Cooke, “Culture, Corporate Governance and Disclosure in Malaysian Corporations,” Abacus,
vol. 38, no. 3, pp. 317–349, 2005.
R. Haniffa and M. Hudaib, “Exploring the ethical identity of Islamic Banks via communication in annual
reports,” J. Bus. Ethics, vol. 76, no. 1, pp. 97–116, 2007, doi: 10.1007/s10551-006-9272-5.
E. Platonova, M. Asutay, R. Dixon, and S. Mohammad, “The Impact of Corporate Social Responsibility
Disclosure on Financial Performance: Evidence from the GCC Islamic Banking Sector,” J. Bus. Ethics, vol.
, no. 2, pp. 451–471, 2018, doi: 10.1007/s10551-016-3229-0.
P. Nurhayati and D. S. Rustiningrum, “Implikasi zakat dan islamic social reporting terhadap kinerja keuangan
pada perbankan syarian di indonesia,” JIEI J. Ilm. Ekon. Islam, vol. 7, no. 03, pp. 1416–1424, 2021, doi:
29040/jiei.v7i3.3168.
A. Hussain et al., “Determinants of Islamic social reporting in Islamic banks of Pakistan,” Int. J. Law Manag.,
vol. 63, no. 1, pp. 1–15, 2021, doi: 10.1108/IJLMA-02-2020-0060.
S. Sutapa and R. Hanafi, “Dampak Islamic Corporate Governance, Islamic Social Reporting Pada Kinerja
Keuangan Bank Syariah di Indonesia,” J. Akunt. Indones., vol. 8, no. 2, pp. 155–165, 2019, doi:
30659/jai.8.2.155-165.
S. Hadinata, “Islamic Social Reporting Index Dan Kinerja Keuangan Pada Perbankan Syariah Di Indonesia,”
EkBis J. Ekon. dan Bisnis, vol. 2, no. 1, pp. 72–95, 2019, doi: 10.14421/ekbis.2018.2.1.1099.
A. Jan, M. Marimuthu, M. P. bin Mohd, and M. Isa, “The nexus of sustainability practices and financial
performance: From the perspective of Islamic banking,” J. Clean. Prod., vol. 228, pp. 703–717, 2019, doi:
1016/j.jclepro.2019.04.208.
T. F. Adisaputra and F. Kurnia, “Pengaruh Islamic Social Reporting Terhadap Kinerja Keuangan, Zakat Sebagai
Intervening Pada Bank Umum Syariah Di Indonesia,” YUME J. Manag., vol. 4, no. 1, pp. 67–75, 2021, doi:
37531/yum.v11.76.
S. Maqbool and M. N. Zamir, “Corporate Social Responsibility Reporting in India: A Study of SENSEX
Companies,” Manag. Labour Stud., vol. 44, no. 2, pp. 209–223, 2019, doi: 10.1177/0258042X19832122.
A. Okafor, M. Adusei, and B. N. Adeleye, “Corporate social responsibility and financial performance: Evidence
from U.S tech firms,” J. Clean. Prod., vol. 292, pp. 1–11, 2021, doi: 10.1016/j.jclepro.2021.126078.
A. Javed, H. Ahmad, and Maeenuddin, “Moderating effect of earnings management on relationship between
corporate social responsibility and financial performance,” Int. J. Adv. Sci. Technol., vol. 29, no. 8, pp. 474–
, 2020.
S. Maqbool and N. Zamir, “Corporate social responsibility and institutional investors: the intervening effect of
financial performance,” J. Econ. Adm. Sci., vol. 37, no. 2, pp. 238–252, 2021, doi: 10.1108/jeas-08-2019-0089.
I. Khan, I. U. Khan, M. J. Uddin, S. U. Khan, and J. Marwat, “No TitleDiversity of Shari’ah supervisory board
and the performance of Islamic banks: evidence from an emerging economy of Pakistan,” J. Islam. Account.
Bus. Res., vol. 22, no. 10, pp. 1–15, 2023, doi: 10.1108/JIABR-09-2021-0240.