Abstract
This paper analyzes the effect of profitability and size of Indonesian Islamic banks on the level of Islamic Social Reporting (ISR) disclosure. This study also investigates the role played by the Sharia Supervisory Board (SSB) in the effect of profitability and size of an Islamic bank on ISR disclosure. The presence of SSB is very important in the operations of Islamic banks. SSB should be involved in important company decisions, including the ISR disclosure. The study covers all 14 Indonesian Islamic commercial banks as a population; the analysis will be conducted based on annual reports of the banks’ divisions for the period 2014–2018. A documentation technique was used to collect the data. Moderated Regression Analysis (MRA) was used for data analysis. The results show that the adjusted R-squared coefficient of the equation is 0.341. R-squared contributions of ROA, ROE, size, and SSB are –0.093, 0.010, 0.983, and –0.081. Other results show that profitability (ROA) and size (total assets) significantly affect the level of ISR disclosure among Indonesian Islamic banks. However, the results were indifferent regarding the role of SSB. There is no significant effect of SSB on ISR disclosure. SSB was important for moderating the relationship between profitability (ROA and ROE) and bank size and ISR disclosure level. SSB’s involvement in the decision making of Islamic banks will have a positive effect on the activities of Islamic banks. Islamic banks will tend to have a high level of ISR. Further researchers can develop SSB measurements for more accurate results.
Highlights
Islamic social reporting (ISR) is a concept that arose out of corporate social responsibility (CSR) and is based on the Islamic sharia principles
This study tries to examine the effect of profitability and size of Indonesian Islamic banks on Islamic Social Reporting (ISR) disclosure
The results indicated that ISR disclosure was determined by profitability and firm size significantly
Summary
Islamic social reporting (ISR) is a concept that arose out of corporate social responsibility (CSR) and is based on the Islamic sharia principles. ISR is based on the teachings of Qur’an, which mandates human beings to be caliphs on earth – it is their responsibility to take care of Allah’s entire creation. This can be referenced back to the Qur’an surah Al-A’raf verse 71, whereby humans are commanded as caliphs to help preserve Allah’s creation. According to Khoirudin (2013), the concepts of ISR can be drawn from the legitimacy and stakeholder theory
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