Implementing Islamic Corporate Governance (ICG) and Islamic Social Reporting (ISR) in Islamic Financial Institution (IFI)

Abstract

Jakarta Islamic Index (JII) is a reference for investors to place their fund in Indonesia Stock Exchange which is in line with Islamic teaching. It has a specific requirements (screening process) which must be passed by one stock to be included in JII. Nevertheless, the screening process of JII composition is seen to have limitations because the process is merely based on the quantitative and qualitative criteria. Therefore, this research explores and analyzes the deeper aspects (Othman, et al., 2009) which is called as Islamic Social Reporting (ISR). ISR analyzes the compliance to Islamic teaching application from the company perspective. The research period is from the year of 2006 until 2008, while the research sample is taken from companies listed in the JII. This research adopts full interaction model to determine significant factors of ISR. Previous research did not apply the interaction model theory, i.e. the Difference in Difference (DiD) theory 1. It can show meaningful existence of dummy variable with other proxies. The proxies used in this study are industry type, company size, and profitability. The results show that there are no differences among the industry type, while the company size affects the ISR. Abstrak. Jakarta Islamic Index (JII) dapat dijadikan referensi untuk inventor yang menempatkan dananya di Bursa Efek Indonesia (BEI) yang sesuai dengan syariah Islam. Indeks tersebut mempunyai karakteristik khusus (screening process) untuk perusahaan agar sahamnya dapat masuk dalam daftar JII. Namun demikian, screening process tersebut masih mempunyai keterbatasan karena hanya fokus pada kriteria kuantitatif dan kualitatif saja. Oleh karena itu, penelitian ini mengeksplorasi dan menganalisis aspek yang mendalam (Othman, et al., 2009) yaitu Islamic Social Reporting (ISR). ISR menganalisis kepatuhan aplikasi syariah Islam dari perspektif perusahaan. Periode riset dimulai dari tahun 2006 hingga 2008. Sedangkan sampel riset merupakan perusahaan yang terdaftar di JII. Penelitian ini mengadopsi model interaksi penuh untuk menentukan factor yang signifikan pada ISR. Penelitian terdahulu tidak mengaplikasikan teori model interaksi, teori Difference in Difference (DiD) theory 2. Teori ini ini dapat menunjukkan eksistensi yang berarti dari variabel dummy dengan proksi lainnya. Proksi yang digunakan dalam penelitian ini adalah jenis industry, uukran perusahaan dan keuntungan. Hasil dari riset ini menunjukkan tidak ada perbedaaan antara jenis industry, sedangkan ukuran perusahaan berpengaruh pada ISR. Kata kunci: Islamic Social Reporting, Jakarta Islamic Index, aset, keuntungan 1 Penulis berterimakasih kepada Prof. I Gusti Ngurah Agung atas kontribusinya dalam memformulasikan model full interaksi dalam makalah ini. 2 Penulis berterimakasih kepada Prof. I Gusti Ngurah Agung atas kontribusinya dalam memformulasikan model full interaksi dalam makalah ini.

Characteristics of the Sharia Supervisory Board and Its Relevance to Islamic Social Reporting at Islamic Banks in Indonesia

“…Islamic Social Reporting is the development of a conventional reporting system that not only contains material, social and moral aspects, but also contains matters relating to Sharia principles, including Sharia compliance, paying zakat, activities that are free from the application of interest/usury, gharar and aspects social aspects, such as saddaqah, waqf, qardhul hassan (Lestari, 2013); (Indrawaty & Wardayati, 2016). Islam wants harmony between economic and spiritual activities in conducting business activities.…”

The Development of Islamic Social Reporting As a Concept of Social Accountability Based on Sharia

“…Other research has done more for empirical research and testing to focus quantitatively than qualitatively [26][27][28][29][30][31][32][33][34]. Arsad et al, in 2014, the level of disclosure of Islamic CSR entirely was still quite low and still did not touch the values and principles of Islam or under the faith protection(Al-Din) [35].…”

15 Pillars of Islamic Good Corporate Governance for The Corporate Level

“…Hasan [4] examined the basic elements of corporate governance in terms of Islam by comparing aspects of the conceptual definition, epistemology, corporate objectives, nature of management, and corporate structure [4]. Indrawaty et al [5] examined the implementation of Islamic corporate governance and Islamic social reporting on Islamic financial institutions. Researchers conduct research based on literature studies and based on research results with similar themes.…”

“…Researchers conduct research based on literature studies and based on research results with similar themes. Several studies have been built to assess how effective and how decisive Islamic corporate governance is in Indonesia [5].…”