The role of the board of directors and the sharia supervisory board on sustainability reports

Abstract

This study aimed to investigate the impact of Board of Directors and Sharia Supervisory Board (SSB) characteristics on sustainability reporting in global Islamic banks. A sample of 136 Islamic banks (IB) was examined, encompassing 536 observations from 2018 to 2021. Sustainability reporting was measured using an index developed by A. Jan et al. (2019), which modified the Global Reporting Initiative standards to suit the characteristics of Sharia-compliant financial institutions. The data was analyzed using a panel data estimation technique known as the Random Effects Model. The study findings revealed that certain board characteristics, such as the size of the Board of Directors, independence of the Board of Directors, size of the SSB, and cross-membership in the SSB, had a positive influence on sustainability reporting in Islamic banks. Additionally, board meetings of the Board of Directors were found to have a negative effect on sustainability reporting. These findings provide valuable insights for companies and policymakers, enhancing their understanding of the board composition that encourages firms to pursue reporting strategies based on sustainable development. Overall, the study contributes to the existing literature by examining the relationship between board attributes and sustainability reporting, particularly from an Islamic perspective.