Abstract-The public's perception about Islamic banks is that, they are ethical banks founded on religious precepts hence; they would be more transparent when compared to conventional banks, but our preliminary studies proves that perception to be wrong. This paper examines the levels of expected and actual ethical identity disclosures by Islamic banks using various dimensions of ethical identity disclosures for 21 banks in Bahrain and Malaysia. The main source of data is the annual reports of each bank for five consecutive years, 2007 to 2011. Data collected were analyzed using Ethical Identity Index (EII) model and Descriptive Analysis. Based on EII analysis, we found that, the aggregate actual applied disclosure in both Malaysia and Bahrain is only 51.7% of the expected industry benchmark. We also found that, the most applied disclosure levels in both countries is the debtor's dimension (77.7%) and the least applied disclosure dimension is the environment disclosures (6.6%). Other important dimensions that might impact on Islamic bank's future acceptance, profitability, growth, sustainability and reputation were less disclosed. Hence, we conclude and recommend for a collective effort and commitment by both regulators and Islamic bank's management to ensure increased ethical disclosures to meet the public perception and expectations.Index Terms-Corporate ethical identity disclosures, disclosure dimensions, Islamic banks, content analysis.
Islamic banks are banks that are set up to operate within the Islamic business framework that is more equitable and based on socioeconomic welfare of the society and the people. In Islamic law on commercial transactions and other related contractual activities (the framework), transparency and adequate disclosure are the fundamental determinants of a successful and peaceful relationship between the contracting parties. This is because the stakeholders of Islamic banks believed that the prescriptions of the framework would be the key determinants of the bank's Ethical Identity Disclosures (EID). This study aimed at exploring and identifying the practical determinants of EID in Islamic banks. Disclosure information in annual reports (from 2007 to 2011) of 21 Islamic banks operating in Bahrain and Malaysia was gathered and analysed using Ethical Identity Index (EII) and Multiple Regression Analysis (MRA) models. The results of EII and MRA on nine ethical disclosure dimensions consisting of 80 constructs and 4 assumed determinants of EID among Islamic banks indicated that EID of both countries is low and that independent directors do not affect the level of social disclosure. However, board size, Shari'ah supervisory Board and investment account holders can significantly influence the disclosure level in Islamic banks. Hence, we conclude that our findings are in conflict with main theories such as agency theory, however supports institutional theory.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.