Financial Performance Mediation in the Influence of Islamic Corporate Governance Disclosure on the Islamic Social Reporting

Abstract

The results of the research on the social role of Islamic banks show inconsistency both domestically and abroad; this is the basis for conducting this research to re-explain the Islamic Corporate Governance (ICG) and Islamic Social Reporting (ISR) relationship, models. This study aims to examine the indirect effect of ICG disclosure on ISR disclosure with financial performance as a mediating variable in Islamic Banking in Indonesia. This study uses secondary data with annual report data sources and financial statements on Islamic banking in Indonesia. They are testing this study using stepwise regression analysis with data for the annual reporting period of 2011 through 2014. The result that financial performance mediates the effect of disclosure of ICG on ISR; this shows that proper management of Islamic banks will produce high financial performance so that they can carry out their social roles well too. The contribution of this study is to develop a new model of the part of financial performance mediating the effect of ICG disclosure on ISR so that it is beneficial for the development of science.

Sharia Governance and Sustainability Reporting: The Mediating Role of Financial Performance

“…Overall, sharia governance (sharia supervisory board, independent commissioner and audit committee) influences sustainability reporting with financial performance (ROA) as a mediating variable. These results are consistent with the studies of (Jones, 2007), (Anas, 2014) and (Budi et al, 2019) that there is a significant influence between shariah governance on sustainability reporting with firm performance mediation variables. This indicates that sharia governance that is implemented well, will be able to encourage Islamic banking to be able to carry out operational activities efficiently and effectively.…”

“…Our independent variable consists of 1) Sharia supervisory board (SSB) which is measured by the number of SSB in the Islamic bank; 2) Independent Board of Commissioners (In Com), measured by the number of Independent Com in the Islamic bank; 3) Directors' Meeting (BODM), measured by the number of We use return on assets (ROA) to measure financial performance (mediating variable). While previous studies (Suteja et al, 2017) and (Budi et al, 2019) use return on equity (ROE) as mediating variable in the relationship between in corporate governance and ISR, this study uses ROA as alternative of financial performance proxy. Since our initial analysis shows that the results with ROE didn't provide optimum result, we use ROA to provide new contribution in the literature.…”

Maqasid Sharia-Based Performance Improvement Model: A Case Study in Islamic Banks in Indonesia

“…Thus, the better the implementation of ICG, the better it will encourage Islamic banking to carry out and report on its social activities. The results of this study are in accordance with research conducted by Indrawaty & Wardayati (2016) and Budi et al, (2019)which found that the application of ICG has a positive and significant effect on ISR. However, the results of this study are not in line with the research of (Rahma & Bukair, 2015)which found that ICG had no effect on ISR.…”

“…The application of ICG will make companies more open in conveying useful information as a type of responsibility for stakeholders and the environment and furthermore society (Sahut andSwitzer, 2013;Stuebs andSun, 2015;Zubeltzu-Jaka et al, 2018). This is in accordance with research conducted by Indrawaty and Wardayati (2016) and Budi et al, (2019) which states that ICG has a positive and significant effect on ISR.…”

The role of corporate social responsibility in increasing company growth through micro waqf bank as a solution for economic resilience in the pandemic

“…Companies that have annual activities community empowerment through CSR programs are encouraged to collaborate with BWM. This synergy will accelerate the process of achieving the vision so that Indonesia's economic growth will quickly rise and play a role in economic resilience during the pandemic and post-pandemic recovery (Budi et al, 2019).…”