Determinants of Islamic social reporting disclosure and its effect on firm’s value

Abstract

Purpose This paper aims to examine the effect of the independent board of commissioners and profitability on Islamic social reporting (ISR) disclosure implemented in companies that belong to the group category of Indeks Saham Syariah Indonesia (ISSI). This study also examined the advanced effect of ISR disclosure as a company strategy to obtain a firm’s value. Design/methodology/approach The data of the independent board of commissioners, profitability, ISR disclosure and firm’s value were obtained from the annual reports of companies whose shares belong to the calculation of ISSI, totaling 24 companies. The ISR disclosure was measured using the content analysis method. While the research model used path analysis. Findings This study found that the independent board of commissioners directly affects the ISR disclosure while indirectly affects the firm’s value as mediated by the ISR disclosure. This finding indicates that the independent board of commissioners is regarded as capable of protecting investors’ interests from problems that may be incurred from asymmetry information. However, this study failed to prove that profitability directly affects the ISR disclosure. Research limitations/implications A list of ISR disclosure items in this research adopted the list developed by Haniffa and Othman, without any additional items. While the measurement of ISR disclosure used the content analysis, therefore there may be subjectivity issues accidentally done while scoring. Practical implications This study recommends management of companies which belong to ISSI to optimize their independent board of commissioners because it has been proven in this study that their presence can significantly encourage a more independent, objective and fair climate while one of its main principles is to pay attention to the interests of minority shareholders and other stakeholders. Besides, the findings can be used to increase awareness of the company management about the importance of transparency in managing a company because the ISR disclosure has received positive responses from investors. Social implications The findings of this study encourage companies to be more transparent in presenting information. An appropriate disclosure will provide a sense of security so that the investors can account for such earthly issues before Allah SWT, thus their spiritual satisfaction can be achieved. Originality/value This paper investigated further the effect of ISR disclosure on firm’s value which has never been performed by previous scholars. The ISR disclosure is a strategy to obtain legitimacy from investors, which was analyzed using the legitimacy theory.

Good Corporate Governance Disclosures and Financial Performance: Islamic Social Reporting and Zakah Disclosures as Mediating

“…So that investor assessment will be positive and will have an impact on increasing the value of the company. The results of this study are in line with research that has been conducted by (Lidyah et al, 2019), (Jihadi et al, 2021) and (Susbiyani et al, 2022).…”

“…Furthermore, the investor's valuation will be positive and will have an impact on increasing the value of the company. Research with the disclosure of ISR as a mediating variable has been carried out by (Lidyah et al, 2019), (Jihadi et al, 2021), and Susbiyani et al (2022). Based on the explanation above, the hypothesis proposed is: H3: Good Corporate Governance Disclosures affects the Performance of Islamic commercial banks in Indonesia through Islamic Social Reporting Disclosures…”

Islamic governance, sharia supervisory board, environmental performance, and Islamic social reporting: Evidence from Indonesia

“…Companies that implement good governance will provide greater corporate social responsibility disclosures or Islamic social reporting (Vo et al, 2022). The results of this study are in line with research conducted by Susbiyani et al (2022), Amran et al (2017) and Fadhila et al (2020) which state that the Islamic Governance Score has a positive influence on the disclosure of Islamic Social Reporting.…”

“…Meanwhile, ISR which is still voluntary causes the reporting of each sharia entity to be different (Jannah & Asrori, 2016). ISR in accordance with Islamic entities in it discloses matters relating to Islamic principles including transactions that are free from elements of usury, speculation, gharar and disclosure of zakat, sharia compliance status and social aspects (infaq, alms, waqf) to reveal how worship in the company environment (Susbiyani et al, 2022). This index is expected to be the initial step in CSR disclosure standards that are in accordance with Islamic principles (Priyanti, 2020).…”

“…Environmental performance is the company's performance in creating a good or green environment (Susbiyani et al, 2022). Strategies in environmental management will produce good environmental performance and will have an impact on increasing company performance (Klassen & McLauglin, 1996).…”