Main Article Content
Abstract
This study aims to examine the relationship between SSB remuneration, SSB cross-membership, board independence, audit committee independence, IAH, leverage, profitability, and firm size to the level of sharia compliance of Islamic banks. In this study, sharia compliance is measured by an index compiled in previous studies. The sample used in this study is 10 Islamic banks that have published annual reports on each website with an observation period between 2015-2020. Multiple regression analysis using EViews 10 application. The results of this study indicate that board independence, audit committee independence, firm size, and SSB cross-membership significantly affect sharia compliance. While SSB remuneration, IAH, leverage, and profitability do not affect the level of sharia compliance.
Keywords
Article Details
Copyright (c) 2022 Muhammad Adib Hasani, Rifqi Muhammad
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References
- Abdullah, W. A. W., Percy, M., & Stewart, J. (2013). Shari’ah disclosures in Malaysian and Indonesian Islamic banks: the shari’ah governance system. Journal of Islamic Accounting and Business Research, 4 (2), 100–131. https://doi.org/10.1108/JIABR-10-2012-0063
- ———. (2015). Determinants of voluntary corporate governance disclosure: evidence from Islamic banks in the Southeast Asian and the Gulf Cooperation Council regions. Journal of Contemporary Accounting and Economics, 11 (3), 262–279. https://doi.org/10.1016/j.jcae.2015.10.001
- Aggarwal, R. K., & Yousef, T. (2000). Islamic banks and investment financing. Journal of Money, Credit and Banking, 32 (1). 93-120. https://doi.org/10.2307/2601094
- Alman, M. (2012). Shari’ah supervisory board composition affects on Islamic banks’ risk-taking behavior. SSRN Electronic Journal, 1-42. http://dx.doi.org/10.2139/ssrn.2140042
- Alrawahi, F. E., & Sarea, A. (2016). An investigations of the level of compliance with International Accounting Standards (IAS 1) by listed firms in Bahrainnnnn bourse. International Journal of Islamic and Middle Eastern Finance and Management, 9 (2), 1-36.
- Al-Sadah, A. K. I. (2007). Corporate governance of Islamic banks, its characteristics and effect on stakeholders and the role of Islamic bank supervisors. Unpublished doctoral dissertation, University of Surrey, U. K.
- Archer, S., Karim, R. A. A., & Nienhaus, V. (2009). Takaful Islamic Insurance: Concepts and Regulatory Issues. Asia: John Wiley & Sons.
- Archer, S, Karim, R. A. A., & At-Deehani. T. (1998). Financial contracting, governance structure and the accounting regulations of Islamics banks: an analysis in terms of agency theory and transactions cost economics. Journal of Management and Governance, 103 (2), 149–70. https://doi.org/10.1142/S0219024906003627
- Aslam, E., Haron, H., & Tahir, M. N. (2019). How director remuneration impacts firm performance: an empirical analysis of executive director remuneration in Pakistan. Borsa Istanbul Review, 19 (2), 1–11.
- Chau, G., & Leung, P. (2006). The impact of board composition and family ownership on audit committee formation : evidence from Hong Kong. International Accounting Auditing & Taxation, 15, 1–15. https://doi.org/10.1016/j.intaccaudtax.2006.01.001
- Chavent, M., Ding, Y., Fu, L., Stolowy, H., & Wang, H. (2006). Disclosure and determinants studies: an extension using the Divisive Clustering Method (DIV). European Accounting Review, 15 (2), 181–218. https://doi.org/10.1080/09638180500253092
- Cotter, J., & Silvester, M. (2003). Board and monitoring committee independence. Abacus, 39 (2), 211-232.
- Dahya, J., Lonie, A. A., & Power, D. M. (1996). The case for separating the roles of chairman and CEO : an analysis of stock market and accounting data. Corporate Governance: An International Review, 4 (2), 52-68. https://doi.org/10.1111/j.1467-8683.1996.tb00136.x
- Das, S., Dixon, R., & Michael, A. (2015). Corporate social responsibility reporting: a longitudinal study of listed banking companies in Bangladesh. World Review of Business Research, 5 (1), 130–154.
- Eisenhardt, K. M. (1989). Agency theory : an assessment and review. Academy of Management Review, 14 (1), 57–74. https://doi.org/10.2307/258191
- El-Halaby, S., & Hussainey, K. (2016). Determinants of compliance with AAOIFI standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 9 (1), 1-22. https://doi.org/10.1108/IMEFM-06-2015-0074
- El-Halaby, S., Hussainey, K., Marie, M., & Mohsen, H. (2018). The determinants of financial, social, and sharia disclosure accountability for Islamic banks. Risk Governance and Control: Financial Markets & Institutions, 8 (3), 21–42.
- Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control separation of ownership and control. Journal of Law and Economics, 26 (2), 301–325. https://dx.doi.org/10.2139/ssrn.94034
- Farook, S., Kabir, M. H., & Lanis, R. (2011). Determinants of corporate social responsibility disclosure: the case of Islamic banks. Journal of Islamic Accounting and Business Research, 2 (2), 114–141. https://ssrn.com/abstract=3263084
- Forker, J. J. (1992). Corporate governance and disclosure quality. Accounting and Business Research 22 (86), 111–124.
- Garas, S., & ElMassah, S. (2018). Corporate governance and corporate social responsibility disclosures: the case of GCC countries. Critical Perspectives on International Business, 14 (1), 2–26.
- Garas, S. N. (2012). The conflicts of interest inside the shari’a supervisory board. International Journal of Islamic and Middle Eastern Finance and Management, 5 (2), 88–105. https://doi.org/10.1108/17538391211233399
- Grassa, R. (2013). Shariah supervisory system in Islamic financial institutions: new issues and challenges: a comparative analysis between Southeast Asia models and GCC models. Humanomics, 29 (4), 333–348. https://doi.org/10.1108/H-01-2013-0001
- Grassa, R., & Matoussi, H. (2014). Corporate governance of Islamic banks: a comparative study between GCC and Southeast Asia countries. International Journal of Islamic and Middle Eastern Finance and Management, 7 (3), 346–362.
- Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance and disclosure in Malaysian corporations. Abacus, 38 (3), 317–349. https://doi.org/10.1111/1467-6281.00112
- Inchausti, A. G. (1997). The influence of company characteristics and accounting regulation on information disclosed by Spanish firms. European Accounting Review, 6 (1), 45–68. https://doi.org/10.1080/096381897336863
- Jensen, M., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3 (4), 1-78.
- Jo, H., & Harjoto. M. A. (2011). Corporate governance and firm value: the impact of corporate social responsibility. Journal of Business Ethics 103 (3), 351–383. https://doi.org/10.1007/s10551-011-0869-y
- Juhmani, O. (2017). Corporate governance and the level of Bahraini corporate compliance with IFRS disclosure. Journal of Applied Accounting Research, 18 (1), 22–41.
- Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: evidence from an emerging economy. Journal of Business Ethics, 114 (2), 207–223.
- Klein, A. (2002). Economic determinants of audit committee independence. The Accounting Review, 77 (2), 435–452.
- Marston, C., & Polei, A. (2004). Corporate reporting on the internet by German companies. International Journal of Accounting Information Systems, 5, 285–311. https://doi.org/10.1016/j.accinf.2004.02.009
- Mnif, Y., & Tahari, M. (2020a). Corporate governance and compliance with AAOIFI governance standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 13 (5), 891–918. https://doi.org/10.1108/IMEFM-03-2019-0123
- ———. (2020b). The effect of Islamic banks’ specific corporate governance mechanisms on compliance with AAOIFI governance standards. Journal of Islamic Accounting and Business Research. 12 (1), 21-43. https://doi.org/10.1108/JIABR-11-2018-0188
- Mnif, Y., & Znazen, O. (2020). Corporate governance and compliance with IFRS 7: the case of financial institutions listed in Canada. Managerial Auditing Journal, 35 (3), 448–474. https://doi.org/10.1108/MAJ-08-2018-1969
- Nomran, N. M., Haron, R., & Hassan, R. (2018). Shari’ah supervisory board characteristics effects on Islamic banks’ performance: evidence from Malaysia. International Journal of Bank Marketing, 36 (2), 290–304. https://doi.org/10.1108/IJBM-12-2016-0197
- Omar, B., & Simon, J. (2011). Corporate aggregate disclosure practices in Jordan. Advances in Accounting, incorporating Advances in International Accounting, 27 (1): 166–186. https://doi.org/10.1016/j.adiac.2011.05.002
- Rahman, A. A., & Bukair, A. A. (2013). The influence of the shariah supervision board on corporate social responsibility disclosure by Islamic banks of gulf co-operation council countries. Asian Journal of Business and Accounting, 6 (2), 65-104.
- ———. (2015). The effect of the board of directors’ characteristics on corporate social responsibility disclosure by Islamic banks. Journal of Management Research 7 (2), 506-519. https://doi.org/10.5296/jmr.v7i2.6989
- Rashid, M., Hassan, M. K., & Ahmad, A. U. F. (2014). The quality perception of the customers towards domestic Islamic banks in Bangladesh. Journal of Islamic Economics, Banking and Finance, 5 (1), 109–131.
- Razali, M. W. M., Yee, N. S., Hwang, J. Y. T., Tak, A. H. B., & Kadri, N. (2018). Directors’ remuneration and firm’s performance: a study on Malaysian listed firm under consumer product industry. International Business Research 11 (5), 102-109. https://doi.org/10.5539/ibr.v11n5p102
- Saqib, L., Farooq, M. A., & Zafar, A. M. (2016). Customer perception regarding shari‘ah compliance of Islamic banking sector of Pakistan. Journal of Islamic Accounting and Business Research, 7 (4), 282–303. https://doi.org/10.1108/JIABR-08-2013-0031
- Sencal, H. & Asutay, M. (2020). Ethical Disclosure in the Shari'ah Annual Reports of Islamic Banks: Disclousure on Shar'iah Governance, Quantitive Empirics and Qualitive Analysis. Corporate Governance, 21 (1), 175-211. https://doi.org/10.1108/CG-01-2020-0037.
- Srairi, S. (2018). Determinants of corporate risk disclosure practice: the case of Islamic banks in gulf cooperation council region. Journal of Muamalat and Islamic Finance Research, 15 (1), 16–38.
- Tsalavoutas, I. (2011). Transition to IFRS and compliance with mandatory disclosure requirements : what is the signal ?. Advances in Accounting, 27 (2), 390–405. https://doi.org/10.1016/j.adiac.2011.08.006
- Ullah, H. (2014). Shari’ah compliance in Islamic banking: an empirical study on selected Islamic banks in Bangladesh. International Journal of Islamic and Middle Eastern Finance and Management, 7 (2), 182–199. https://doi.org/10.1108/IMEFM-06-2012-0051
- Watts, R. L., & Zimmerman, J. L. (1990). Positive accounting theory: a ten-year perspective. The Accounting Review, 65 (1), 131–156.
- ———. (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53 (1), 112–134.
References
Abdullah, W. A. W., Percy, M., & Stewart, J. (2013). Shari’ah disclosures in Malaysian and Indonesian Islamic banks: the shari’ah governance system. Journal of Islamic Accounting and Business Research, 4 (2), 100–131. https://doi.org/10.1108/JIABR-10-2012-0063
———. (2015). Determinants of voluntary corporate governance disclosure: evidence from Islamic banks in the Southeast Asian and the Gulf Cooperation Council regions. Journal of Contemporary Accounting and Economics, 11 (3), 262–279. https://doi.org/10.1016/j.jcae.2015.10.001
Aggarwal, R. K., & Yousef, T. (2000). Islamic banks and investment financing. Journal of Money, Credit and Banking, 32 (1). 93-120. https://doi.org/10.2307/2601094
Alman, M. (2012). Shari’ah supervisory board composition affects on Islamic banks’ risk-taking behavior. SSRN Electronic Journal, 1-42. http://dx.doi.org/10.2139/ssrn.2140042
Alrawahi, F. E., & Sarea, A. (2016). An investigations of the level of compliance with International Accounting Standards (IAS 1) by listed firms in Bahrainnnnn bourse. International Journal of Islamic and Middle Eastern Finance and Management, 9 (2), 1-36.
Al-Sadah, A. K. I. (2007). Corporate governance of Islamic banks, its characteristics and effect on stakeholders and the role of Islamic bank supervisors. Unpublished doctoral dissertation, University of Surrey, U. K.
Archer, S., Karim, R. A. A., & Nienhaus, V. (2009). Takaful Islamic Insurance: Concepts and Regulatory Issues. Asia: John Wiley & Sons.
Archer, S, Karim, R. A. A., & At-Deehani. T. (1998). Financial contracting, governance structure and the accounting regulations of Islamics banks: an analysis in terms of agency theory and transactions cost economics. Journal of Management and Governance, 103 (2), 149–70. https://doi.org/10.1142/S0219024906003627
Aslam, E., Haron, H., & Tahir, M. N. (2019). How director remuneration impacts firm performance: an empirical analysis of executive director remuneration in Pakistan. Borsa Istanbul Review, 19 (2), 1–11.
Chau, G., & Leung, P. (2006). The impact of board composition and family ownership on audit committee formation : evidence from Hong Kong. International Accounting Auditing & Taxation, 15, 1–15. https://doi.org/10.1016/j.intaccaudtax.2006.01.001
Chavent, M., Ding, Y., Fu, L., Stolowy, H., & Wang, H. (2006). Disclosure and determinants studies: an extension using the Divisive Clustering Method (DIV). European Accounting Review, 15 (2), 181–218. https://doi.org/10.1080/09638180500253092
Cotter, J., & Silvester, M. (2003). Board and monitoring committee independence. Abacus, 39 (2), 211-232.
Dahya, J., Lonie, A. A., & Power, D. M. (1996). The case for separating the roles of chairman and CEO : an analysis of stock market and accounting data. Corporate Governance: An International Review, 4 (2), 52-68. https://doi.org/10.1111/j.1467-8683.1996.tb00136.x
Das, S., Dixon, R., & Michael, A. (2015). Corporate social responsibility reporting: a longitudinal study of listed banking companies in Bangladesh. World Review of Business Research, 5 (1), 130–154.
Eisenhardt, K. M. (1989). Agency theory : an assessment and review. Academy of Management Review, 14 (1), 57–74. https://doi.org/10.2307/258191
El-Halaby, S., & Hussainey, K. (2016). Determinants of compliance with AAOIFI standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 9 (1), 1-22. https://doi.org/10.1108/IMEFM-06-2015-0074
El-Halaby, S., Hussainey, K., Marie, M., & Mohsen, H. (2018). The determinants of financial, social, and sharia disclosure accountability for Islamic banks. Risk Governance and Control: Financial Markets & Institutions, 8 (3), 21–42.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control separation of ownership and control. Journal of Law and Economics, 26 (2), 301–325. https://dx.doi.org/10.2139/ssrn.94034
Farook, S., Kabir, M. H., & Lanis, R. (2011). Determinants of corporate social responsibility disclosure: the case of Islamic banks. Journal of Islamic Accounting and Business Research, 2 (2), 114–141. https://ssrn.com/abstract=3263084
Forker, J. J. (1992). Corporate governance and disclosure quality. Accounting and Business Research 22 (86), 111–124.
Garas, S., & ElMassah, S. (2018). Corporate governance and corporate social responsibility disclosures: the case of GCC countries. Critical Perspectives on International Business, 14 (1), 2–26.
Garas, S. N. (2012). The conflicts of interest inside the shari’a supervisory board. International Journal of Islamic and Middle Eastern Finance and Management, 5 (2), 88–105. https://doi.org/10.1108/17538391211233399
Grassa, R. (2013). Shariah supervisory system in Islamic financial institutions: new issues and challenges: a comparative analysis between Southeast Asia models and GCC models. Humanomics, 29 (4), 333–348. https://doi.org/10.1108/H-01-2013-0001
Grassa, R., & Matoussi, H. (2014). Corporate governance of Islamic banks: a comparative study between GCC and Southeast Asia countries. International Journal of Islamic and Middle Eastern Finance and Management, 7 (3), 346–362.
Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance and disclosure in Malaysian corporations. Abacus, 38 (3), 317–349. https://doi.org/10.1111/1467-6281.00112
Inchausti, A. G. (1997). The influence of company characteristics and accounting regulation on information disclosed by Spanish firms. European Accounting Review, 6 (1), 45–68. https://doi.org/10.1080/096381897336863
Jensen, M., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics, 3 (4), 1-78.
Jo, H., & Harjoto. M. A. (2011). Corporate governance and firm value: the impact of corporate social responsibility. Journal of Business Ethics 103 (3), 351–383. https://doi.org/10.1007/s10551-011-0869-y
Juhmani, O. (2017). Corporate governance and the level of Bahraini corporate compliance with IFRS disclosure. Journal of Applied Accounting Research, 18 (1), 22–41.
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social responsibility disclosures: evidence from an emerging economy. Journal of Business Ethics, 114 (2), 207–223.
Klein, A. (2002). Economic determinants of audit committee independence. The Accounting Review, 77 (2), 435–452.
Marston, C., & Polei, A. (2004). Corporate reporting on the internet by German companies. International Journal of Accounting Information Systems, 5, 285–311. https://doi.org/10.1016/j.accinf.2004.02.009
Mnif, Y., & Tahari, M. (2020a). Corporate governance and compliance with AAOIFI governance standards by Islamic banks. International Journal of Islamic and Middle Eastern Finance and Management, 13 (5), 891–918. https://doi.org/10.1108/IMEFM-03-2019-0123
———. (2020b). The effect of Islamic banks’ specific corporate governance mechanisms on compliance with AAOIFI governance standards. Journal of Islamic Accounting and Business Research. 12 (1), 21-43. https://doi.org/10.1108/JIABR-11-2018-0188
Mnif, Y., & Znazen, O. (2020). Corporate governance and compliance with IFRS 7: the case of financial institutions listed in Canada. Managerial Auditing Journal, 35 (3), 448–474. https://doi.org/10.1108/MAJ-08-2018-1969
Nomran, N. M., Haron, R., & Hassan, R. (2018). Shari’ah supervisory board characteristics effects on Islamic banks’ performance: evidence from Malaysia. International Journal of Bank Marketing, 36 (2), 290–304. https://doi.org/10.1108/IJBM-12-2016-0197
Omar, B., & Simon, J. (2011). Corporate aggregate disclosure practices in Jordan. Advances in Accounting, incorporating Advances in International Accounting, 27 (1): 166–186. https://doi.org/10.1016/j.adiac.2011.05.002
Rahman, A. A., & Bukair, A. A. (2013). The influence of the shariah supervision board on corporate social responsibility disclosure by Islamic banks of gulf co-operation council countries. Asian Journal of Business and Accounting, 6 (2), 65-104.
———. (2015). The effect of the board of directors’ characteristics on corporate social responsibility disclosure by Islamic banks. Journal of Management Research 7 (2), 506-519. https://doi.org/10.5296/jmr.v7i2.6989
Rashid, M., Hassan, M. K., & Ahmad, A. U. F. (2014). The quality perception of the customers towards domestic Islamic banks in Bangladesh. Journal of Islamic Economics, Banking and Finance, 5 (1), 109–131.
Razali, M. W. M., Yee, N. S., Hwang, J. Y. T., Tak, A. H. B., & Kadri, N. (2018). Directors’ remuneration and firm’s performance: a study on Malaysian listed firm under consumer product industry. International Business Research 11 (5), 102-109. https://doi.org/10.5539/ibr.v11n5p102
Saqib, L., Farooq, M. A., & Zafar, A. M. (2016). Customer perception regarding shari‘ah compliance of Islamic banking sector of Pakistan. Journal of Islamic Accounting and Business Research, 7 (4), 282–303. https://doi.org/10.1108/JIABR-08-2013-0031
Sencal, H. & Asutay, M. (2020). Ethical Disclosure in the Shari'ah Annual Reports of Islamic Banks: Disclousure on Shar'iah Governance, Quantitive Empirics and Qualitive Analysis. Corporate Governance, 21 (1), 175-211. https://doi.org/10.1108/CG-01-2020-0037.
Srairi, S. (2018). Determinants of corporate risk disclosure practice: the case of Islamic banks in gulf cooperation council region. Journal of Muamalat and Islamic Finance Research, 15 (1), 16–38.
Tsalavoutas, I. (2011). Transition to IFRS and compliance with mandatory disclosure requirements : what is the signal ?. Advances in Accounting, 27 (2), 390–405. https://doi.org/10.1016/j.adiac.2011.08.006
Ullah, H. (2014). Shari’ah compliance in Islamic banking: an empirical study on selected Islamic banks in Bangladesh. International Journal of Islamic and Middle Eastern Finance and Management, 7 (2), 182–199. https://doi.org/10.1108/IMEFM-06-2012-0051
Watts, R. L., & Zimmerman, J. L. (1990). Positive accounting theory: a ten-year perspective. The Accounting Review, 65 (1), 131–156.
———. (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53 (1), 112–134.