Sustainability Reporting Disclosure in Islamic Corporates: Do Human Governance, Corporate Governance, and IT Usage Matter?

Idris Gautama So,Synthia Atas Sari,Elfindah Princes,Hasnah Haron,Anderes Gui

doi:10.3390/su132313023

Idris Gautama So, Synthia Atas Sari + Show 3 more

Open Access

https://doi.org/10.3390/su132313023

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Journal: Sustainability	Publication Date: Nov 24, 2021
Citations: 5	License type: CC BY 4.0

Affiliation: Binus University, Universiti Sains Malaysia

Abstract

In developing countries, particularly South Asia, there is scarce research on corporate governance and sustainability reporting disclosure. This study considers several insightful theories, including Stakeholder Theory, Agency Theory, and the TOE Framework, to understand the relationships and drivers of sustainability reporting. The study examines Indonesian Islamic corporates using data from the ISSI (Indonesia Shariah Stock Index). We gathered annual reports and sustainability reports from the ISSI database for the year 2019. The study investigates how human governance (HG), Islamic corporate governance (ICG), and information technology usage (ITU) are related to sustainability reporting disclosure (SR). The findings showed that the sustainability reporting disclosure was significantly influenced by human governance and Islamic corporate governance with firm size and leverage. Furthermore, the research showed that profitability was not significantly related to sustainability reporting disclosure, that Islamic corporate governance had a significant negative influence on SR, and that IT usage was only significant when human governance was not present. Finally, the results showed that human governance is the main driver of sustainability reporting disclosure. Therefore, we conclude that human governance is the best predictor for sustainability reporting disclosure.

Highlights

Following the Great Recession of 2008, many people sought a remedy to the economy due to high unemployment and associated labor market problems [1,2], and Islamic finance has since received much attention
This study suggests that Islamic CG mechanisms significantly influence sustainability performance, consistent with theories and previous research [4]. [6] used a quantitative approach with secondary data in the period 2010–2015 in nine Islamic banks and revealed that Islamic corporate governance (ICG) has a significant effect on financial performance, ICG has no significant impact on sustainability, and Islamic financial performance has a significant effect on sustainability
The present research shows that profitability was the only insignificant variable in each hypothesis

Summary

Introduction

Following the Great Recession of 2008, many people sought a remedy to the economy due to high unemployment and associated labor market problems [1,2], and Islamic finance has since received much attention. Corporate governance is one of the critical areas that has received much attention because it is a tool for steering the economy [3,4,5,6]. Questions on Islamic corporate governance were answered differently with three approaches [7,8]:. To remain competitive in the global digitalization era, a company must implement human governance. Human governance is a theory that serves as a foundation and guides everyone in a business or organization to act according to values and ethics [9].

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Conclusion