Determinants ofShari’ahgovernance disclosure in financial institutions

Abstract

Purpose -This paper aims to investigate factors influencing Shari'ah governance disclosure (SGD) in financial institutions.Design/methodology/approach -Using content analysis approach, 46 annual reports published in 2015 by banks and insurance companies were investigated based on a self-constructed disclosure index.Findings -The results show that the average level of voluntary disclosure of Shari'ah governance in Saudi financial institutions is 11.7 per cent, which is lower than expectations Moreover, regression analysis shows that industry type, ownership structure and board composition significantly determine the extent of voluntary disclosure of Shari'ah governance. Local financial institutions which are owned by non-governmental agencies are more likely to disclose voluntarily their Shari'ah governance, in particular from the banking industry.Research limitations/implications -It also bridges the gap between theory and practice and can be used to practice economic and commercial impact in teaching to influence public policy in research contributing to the body of knowledge and especially for the insurance sector and government.Social implications -It provides guidance to the ethical investors and supports them in the decisionmaking process.Originality/value -This research extends the investigation of SGD into insurance sector in a country that has a general policy about adhering to Islamic principles. Financial institutions might go beyond the country affirmations to legitimate their identity in response to the society critiques about the issue. Accordingly, internal attributes and strategies of financial institutions may play a significant role in distinguishing its compliance with Islamic principles to respond to the society critiques about financial transactions.

The determinants of Islamic governance disclosure: the case of Indonesian Islamic banks

“…Therefore, it does not depend on the status of the company, whether it could make a profit or not. Research findings supported the previous studies (Azid & Alnodel, 2018;Samaha et al, 2012). However, there is evidence to suggest that profitability has a positive and significant effect on IGD (Grassa, 2018;Sarhan & Ntim, 2018).…”

“…Azid and Alnodel (2018) and Albassam and Ntim (2017) found the influence of the board composition on shariah governance disclosure. Ownership structure is also a determinant of IGD (Azid & Alnodel, 2018;Grassa, 2018). Islamic banks owned by the government tend to be more obedient.…”

“…The factors that influence the extent of Islamic governance disclosure have not yet been widely studied. Azid and Alnodel (2018) found that industry type, ownership structure, and board composition have a significant effect on the SGD area. While size, leverage, and ROA did not prove to have a significant effect.…”

Impact of corporate governance mechanism on IFRS adoption: A comparative study of Saudi Arabia, Oman, and the United Arab Emirates

“… Al-Ruithe and Benkhelifa (2020) explored the factors for implementing cloud data governance in the Kingdom of Saudi Arabia (KSA). Azid and Alnodel (2019) examined Shari'ah governance disclosure in financial institutions in KSA. Sian et al.…”

Corporate governance and IFSB standard-4: evidence from Islamic banks in Bangladesh

“…The study investigated the relationship between institutional ownership and the disclosure of IFSB as the institutional shareholders play a significant role in monitoring the management of banks and helping to disclose more details related to products and services that lead the business to better financial results (Grassa et al, 2018). In Saudi Arabia, Azid and Alnodel (2019) found that local financial institutions owned by non-governmental agencies are more likely to voluntarily reveal their Shari'ah governance, especially from the banking sector. Therefore, the following hypothesis is developed:…”