DoesShariahcommittee composition influenceShariahgovernance disclosure?

Abstract

Purpose The purpose of this paper is to investigate the empirical linkage between the composition of Shariah Committee and the extent of Shariah governance disclosure in 16 licensed Islamic banks in Malaysia. Design/methodology/approach This paper adopted a multiple regression analysis to test the association between the composition of Shariah Committee and the extent of Shariah governance disclosure. A disclosure index was developed to measure the extent of Shariah governance disclosure made by the Islamic banks. Whereas to measure the extent of Shariah governance disclosure, this study used content analysis as a method of coding qualitative information in the annual reports. Findings Using 2009 data, the study found a significant association between different compositions of the Shariah Committee in the Malaysian Islamic banks and their Shariah governance disclosure level before the introduction of the Shariah Governance Framework (SGF). However, because of less variation in the composition of Shariah Committee after the introduction of SGF 2010, a weak linkage was found between the composition of Shariah Committee and the extent of Shariah disclosure of Malaysian Islamic banks in 2013. Research limitations/implications Findings of this study offer several implications for further improvements of the Malaysian Islamic banking sector in particular, and other Islamic banks globally. As better composition of Shariah Committee in terms of its size, academic background and other relevant expertise would result in effective monitoring system leading to better practices of Shariah disclosure, this finding highlights the relevance and important role of the Shariah Committee in improving voluntary Shariah disclosure level of the Islamic banks. This finding suggests that ample focus has to be channelled in strengthening the composition of Shariah Committee in crafting future development of SGF in Malaysia. It is also suggested that Islamic banks need to give priority in providing more education and training in various areas of expertise to their Shariah Committee members that would result in greater confidence of investors, stakeholders and the society on the information disclosed by the banks. Originality/value The novelty of this paper lies in highlighting the importance of different composition of Shariah Committee in determining the extent of voluntary disclosure made on Shariah matters by the Islamic banks.

The Effect of Cross-Sharia Membership and the Size of the Sharia Supervisory Board, the Size of the Company on the Disclosure of Sharia Compliance

“…Size of the shariah Supervisory Board has a probability value of 0.0153 greater than the significance of 0.05 (0.0153 <0.05, so H0 Rejected which means size of the shariah Supervisory Board has a positive effect on the disclosure of shari'ah. It means that the large number of DPS members will have an impact on the desire to disclose sharia compliance in sharia bank financial statements [13].…”

“…It has a partial meaning that the Cross Membership of the sharia supervisory board variable has no effect on the disclosure of shari'ah. It means that this means that the number of DPS memberships in professional organizations does not impact on the desire to disclose sharia compliance [13].…”

“…The strategy used in this study is a casual associative study strategy, the study aims to determine the relationship between the events that occur or influence between two or more variables. Population of the study is the Islamic bank in Indonesia totally 13 [1]. Each indicator has the same weight.…”

Do the Characteristics of Internal Audits and Compliance Functions Affect Sharia Compliance?

“…Both IA and CF are also included as sharia governance organs involved in the sharia supervision process. The majority of studies testing the SSB's performance were conducted by Haridan et al, (2018), Violita & Handarbeni (2017), Noordin & Kassim (2016), Rahman & Bukair (2013). Thus, further research into the role of IA and CF in sharia compliance is needed.…”

“…Haji and Ghazali (2013), on Noordin & Kassim (2016), indicated that a greater number of members in a governance body should provide more collective knowledge and skills. Moreover, the diversity of knowledge and skills and experience among such members is believed to facilitate the supervision process of sharia compliance (Rahman & Bukair, 2013).…”