Social Reporting of Islamic Banks in Malaysia: 3 Stages Approach.

Abstract

This study examines the social disclosure by Islamic banks in Malaysia. The study explores the commitment of Islamic banks towards wider stakeholders in 7 dimensions (Shariah/Social Internal/Social External/ Environmental/Shariah Governance/Governance/Ethic) SEGE. The approach taken uses an in-depth 3-Stages content analysis (3-level Score disclosure) of 18 Malaysian Islamic banks’ annual reports for a period of 5 years (2010-2014). This ‘triple method’ was made possible using a special design manual sheet (Quality Score & Volume). The top 5 performing Islamic banks in disclosure quality were dominated by Malaysian Islamic banks. Furthermore, the top 10 performing Islamic banks ranking in disclosure movement from ordinary (index) to quality (3-level score) were much steadier in Malaysia. In addition, religiosity and regulatory quality seem to have influenced SEGE disclosure. In short, the Islamic banks that operate in environments with supportive governing bodies, collaborative institutions, sustainable talent management systems and moderate values tend to perform comparatively better in their SEGE disclosure. This research may draw attention to regulators and non-governmental organisations to produce a set of SEGE disclosure standards for Islamic financial institutions. Furthermore, this research might help managers, Board of Directors, and Shariah Supervisory Boards to have a greater view on the role of Islamic banks in social reporting initiatives. The study fills gaps in Islamic accounting literature by having an in-depth examination of the Malaysian model of Islamic banking.