Email this article EXPLORING THE IMPACT OF SHARIA SUPERVISORY BOARD CHARACTERISTICS ON ENVIRONMENTAL DISCLOSURE: A GLOBAL STUDY OF ISLAMIC BANKS
Abstract
This research assesses the extent to which Sharia Supervisory Board (SSB) traits impact the worldwide phenomenon of environmental disclosures of Islamic Banks. We used Multivariate Regression Analysis to assess the environmental disclosures of 33 Islamic Banks in the world using the GRI 300 standards obtained from the Refinitiv Database, while the SSB traits of Shariah Qualification, Financial Expertise, Gender and Nationality Diversity, Board Size, and the Annual Reports of the Banks were manually collected as SSB were visions of Mufti Shariah. The research employed Panel Data Regression using the Fixed Effects Estimator to control for unobserved heterogeneity around the Banks and to ensure the reliability of the findings. The results showed that Gender and National Diversity had a positive effect on Mukahara Shariah, meaning that more Diversity in Religion and Nationality of the Board Members led to more disclosure. In contrast, Shariah Qualification had a negative effect, while financial expertise and Board Size had no effect. The research results demonstrate the importance of SSB to advance the Disclosure of Sustainability Reporting Construction to the elders, that SSBs must give More Priority to diversity over traditional religious qualifications. The research results have effectively empowered the Regulators of Islamic Financial Institutions to complement the SSBs to include the Responsible Sharia Governance of Islamic Banking Systems for Compliance with the Global Sustainability Standards.
Keywords
Full Text:
PDFReferences
AAOIFI. (2010). Accounting, auditing and governance standards for Islamic financial institutions. http://aaoifi.com/standard/accounting-standards/?lang=en
Afzali, M., Colak, G., & Vähämaa, S. (2024). Climate change denial and corporate environmental responsibility. Journal of Business Ethics. https://doi.org/10.1007/s10551-024-05625-y
Ahmad, H., Yaqub, M., & Lee, S. H. (2023). Environmental-, social-, and governance-related factors for business investment and sustainability: A scientometric review of global trends. Environment, Development and Sustainability, 26(2), 2965–2987. https://doi.org/10.1007/s10668-023-02921-x
Ahmed, H. (2005). Islamic financial products. In Islamic Banking and Finance in South-East Asia (pp. 62–91). World Scientific. https://doi.org/10.1142/9789812569394_0005
Ahmed, H. M. (2023a). Top five challenges for Islamic banking. The Halal Times. https://www.halaltimes.com/top-five-challenges-for-islamic-banking/
Ahmed, H. M. (2023b, September 22). How can Islamic finance contribute to sustainable financial growth? The Halal Times. https://www.halaltimes.com/how-can-islamic-finance-contribute-to-sustainable-financial-growth/
Aisyah, S., Umar Mai, M., & Suhartanto, D. (2022). Board characteristic and Shari’a banks performance: Evidence from Indonesia and Malaysia 2015-2020. IQTISHADIA Jurnal Ekonomi & Perbankan Syariah, 9(2), 168–179. https://doi.org/10.19105/iqtishadia.v9i2.6330
Al Mannai, M., & Ahmed, H. (2019). Exploring the workings of Shari’ah supervisory board in Islamic finance: A perspective of Shari’ah scholars from GCC. The Quarterly Review of Economics and Finance, 74, 97–108. https://doi.org/10.1016/j.qref.2018.05.017
Alfraih, M. M. (2016). The effectiveness of board of directors’ characteristics in mandatory disclosure compliance. Journal of Financial Regulation and Compliance, 24(2), 154–176. https://doi.org/10.1108/JFRC-07-2015-0035
Aliyu, S., Hassan, M. K., Mohd Yusof, R., & Naiimi, N. (2016). Islamic banking sustainability: A review of literature and directions for future research. Emerging Markets Finance and Trade, 1–31. https://doi.org/10.1080/1540496X.2016.1262761
Al-Qahtani, M., & Elgharbawy, A. (2020). The effect of board diversity on disclosure and management of greenhouse gas information: Evidence from the United Kingdom. Journal of Enterprise Information Management, 33(6), 1557–1579. https://doi.org/10.1108/JEIM-08-2019-0247
Ammar, R., Rebai, S., & Saidane, D. (2023). Toward the development of an Islamic banking sustainability performance index. International Journal of Islamic and Middle Eastern Finance and Management, 16(4), 734–755. https://doi.org/10.1108/IMEFM-12-2021-0479
Amyulianthy, R., & Azizah, W. (2019). Islamic social reporting in Shariah banks in Indonesia. [Unpublished manuscript/Conference Paper].
Ardianto, A., Cahyono, S., Noman, A. H., & Sulaiman, N. A. (2024). Sharia-supervisory board’s characteristics and green banking disclosure: Exploring from Islamic banking in MENA countries. International Journal of Ethics and Systems. https://doi.org/10.1108/IJOES-06-2024-0171
Arifin, J., & Wardani, E. A. (2016). Islamic corporate social responsibility disclosure, reputasi, dan kinerja keuangan: Studi pada bank syariah di Indonesia. Jurnal Akuntansi & Auditing Indonesia, 20(1), 38–46. https://doi.org/10.20885/jaai.vol20.iss1.art4
Asutay, M., & Harningtyas, A. F. (2015). Developing Maqasid al-Shari’ah index to evaluate social performance of Islamic banks: A conceptual and empirical attempt. International Journal of Islamic Economics and Finance Studies, 1(1)
Ayub, M. (2007). Understanding Islamic finance. John Wiley & Sons Ltd.
Bateman, A. H., Blanco, E. E., & Sheffi, Y. (2017). Disclosing and reporting environmental sustainability of supply chains. In Sustainable Supply Chains (pp. 119–144). Springer. https://doi.org/10.1007/978-3-319-29791-0_6
Bedoui, M. H. (2012). Shari‘a-based ethical performance measurement framework. Chair of Ethics and Financial Norms, 1–12.
Ben Abdallah, M., & Bahloul, S. (2021). Disclosure, Shariah governance and financial performance in Islamic banks. Asian Journal of Economics and Banking, 5(3), 234–254. https://doi.org/10.1108/AJEB-05-2021-0056
Berthelot, S., Cormier, D., & Magnan, M. (2003). Environmental disclosure: A study of Canadian firms. Journal of Accounting Literature, 22(1), 1–44.
Boeske, J. (2023). Leadership towards sustainability: A review of sustainable, sustainability, and environmental leadership. Sustainability, 15(16), 12626. https://doi.org/10.3390/su151612626
Bosetti, L. (2022). Global Reporting Initiative Standards. In Encyclopedia of Sustainable Management (pp. 1–13). Springer International Publishing. https://doi.org/10.1007/978-3-030-02006-4_1033-1
Caporale, G. M., Gil-Alana, L., & Plastun, A. (2018). Persistence in the cryptocurrency market. Research in International Business and Finance, 46, 141–148. https://doi.org/10.1016/j.ribaf.2018.01.002
Chapra, M. U. (2001). The future of economics: An Islamic perspective. Shari’ah Economics and Banking Institute.
Clarke, A. (2023, July 11). Islamic finance: Unlocking opportunities beyond religious boundaries. Nasdaq. https://www.nasdaq.com/articles/islamic-finance-unlocking-opportunities-beyond-religious-boundaries
Disli, M., Aysan, A. F., & Abdelsalam, O. (2023). Favoring the small and the plenty: Islamic banking for MSMEs. Economic Systems, 47(1), 101051. https://doi.org/10.1016/j.ecosys.2022.101051
El-Essa, M., Weshah, S., & Nofal, M. (2024). Understanding the practices and challenges of sustainability reporting in Islamic banking. In Impact of Digital Transformation on Global Economy (pp. 75–85). Springer. https://doi.org/10.1007/978-3-031-48770-5_8
Esa, E., & Ghazali, N. A. M. (2012). Corporate social responsibility and corporate governance in Malaysian government‐linked companies. Corporate Governance: The International Journal of Business in Society, 12(3), 292–305. https://doi.org/10.1108/14720701211234564
Farag, H., Mallin, C., & Ow-Yong, K. (2018). Corporate governance in Islamic banks: New insights for dual board structure and agency relationships. Journal of International Financial Markets, Institutions and Money, 54, 59–77. https://doi.org/10.1016/j.intfin.2017.08.002
Farook, S. Z., Lanis, R., & Hassan, K. M. (2011). Determinants of corporate social responsibility disclosure: The case of Islamic banks. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1828624
Finkelstein, S., & Hambrick, D. C. (1990). Top-management-team tenure and organizational outcomes: The moderating role of managerial discretion. Administrative Science Quarterly, 35(3), 484–503. https://doi.org/10.2307/2393314
García-Meca, E., García-Sánchez, I.-M., & Martínez-Ferrero, J. (2015). Board diversity and its effects on bank performance: An international analysis. Journal of Banking & Finance, 53, 202–214. https://doi.org/10.1016/j.jbankfin.2014.12.002
GRI. (2016). The GRI standards. https://www.globalreporting.org/how-to-use-the-gri-standards/gri-standards-english-language/
Gümrah, A., Güngör Tanç, Ş., & Tanç, A. (2019). Scoring of sustainability reports with GRI-G4 economic, environmental, and social performance indicators: A research on the companies preparing sustainability report in Turkey. In Current Debates in Business Studies (pp. 133–151). Springer. https://doi.org/10.1007/978-981-13-3203-6_8
Habib, F. (2023). Islamic finance and sustainability: The need to reframe notions of Shariah compliance, purpose, and value. In Islamic Finance and Sustainable Development (pp. 15–40). Springer. https://doi.org/10.1007/978-3-031-13302-2_2
Hambrick, D. C. (2018). Upper echelons theory. In The Palgrave Encyclopedia of Strategic Management (pp. 1782–1785). Palgrave Macmillan UK. https://doi.org/10.1057/978-1-137-00772-8_785
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. The Academy of Management Review, 9(2), 193–206. https://doi.org/10.2307/258434
Harjoto, M. A., Laksmana, I., & Yang, Y.-W. (2018). Board nationality diversity and corporate social responsibility. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3252114
Hartanto, A., Nachrowi, N. D., Samputra, P. L., & Huda, N. (2024). A bibliometric analysis of Islamic banking sustainability: A study based on Scopus scientific database. Journal of Islamic Marketing, 15(9), 2245–2285. https://doi.org/10.1108/JIMA-04-2023-0123
Hoang, H. V. (2023). Environmental, social, and governance disclosure in response to climate policy uncertainty: Evidence from US firms. Environment, Development and Sustainability, 26(2), 4293–4333. https://doi.org/10.1007/s10668-022-02884-5
Ibrahim, A. H., & Hanefah, M. M. (2016). Board diversity and corporate social responsibility in Jordan. Journal of Financial Reporting and Accounting, 14(2), 279–298. https://doi.org/10.1108/jfra-06-2015-0065
ICIEC. (2023). The future of Islamic finance in a COVID-19 world. https://iciec.isdb.org/insights/future-of-islamic-finance/
Isidro, H., & Sobral, M. (2015). The effects of women on corporate boards on firm value, financial performance, and ethical and social compliance. Journal of Business Ethics, 132(1), 1–19. https://doi.org/10.1007/s10551-014-2302-9
Issa, A., Zaid, M. A. A., Hanaysha, J. R., & Gull, A. A. (2022). An examination of board diversity and corporate social responsibility disclosure: Evidence from banking sector in the Arabian Gulf countries. International Journal of Accounting and Information Management, 30(1), 22–46. https://doi.org/10.1108/IJAIM-07-2021-0137
Jabari, H. N., & Muhamad, R. (2020). Gender diversity and financial performance of Islamic banks. Journal of Financial Reporting and Accounting, 19(3), 412–433. https://doi.org/10.1108/JFRA-03-2020-0061
Jan, A., Marimuthu, M., Mohd, M. P. bin, & Isa, M. (2018). Sustainability practices and banks financial performance: A conceptual review from the Islamic banking industry in Malaysia. International Journal of Business and Management, 13(11), 61. https://doi.org/10.5539/ijbm.v13n11p61
Jizi, M. (2017). The influence of board composition on sustainable development disclosure. Business Strategy and the Environment, 26(5), 640–655. https://doi.org/10.1002/bse.1943
Jizi, M. I., Salama, A., Dixon, R., & Stratling, R. (2014). Corporate governance and corporate social responsibility disclosure: Evidence from the US banking sector. Journal of Business Ethics, 125(4), 601–615. https://doi.org/10.1007/s10551-013-1929-2
Keeble, B. R. (1988). The Brundtland report: ‘Our common future.’ Medicine and War, 4(1), 17–25. https://doi.org/10.1080/07488008808408783
Khan, I., Khan, I., & Senturk, I. (2019). Board diversity and quality of CSR disclosure: Evidence from Pakistan. Corporate Governance, 19(6), 1187–1203. https://doi.org/10.1108/CG-12-2018-0371
Khan, I., Khan, M., & Tahir, M. (2017). Performance comparison of Islamic and conventional banks: Empirical evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(3), 419–433. https://doi.org/10.1108/IMEFM-05-2016-0077
Khutub, M. (2017). Ekonomi syari’ah dan lingkungan hidup: Studi analisis fatwa DSN-MUI tentang pasar modal dan pedoman umum penerapan prinsip syariah di bidang pasar modal. UIN Sunan Kalijaga Yogyakarta.
KPMG. (2022, September). Key global trends in sustainability reporting. https://kpmg.com/xx/en/our-insights/esg/survey-of-sustainability-reporting-2022/global-trends.html
Kramarz, T., & Park, S. (2016). Accountability in global environmental governance: A meaningful tool for action? Global Environmental Politics, 16(2), 1–21. https://doi.org/10.1162/GLEP_a_00349
Kula, E. (2001). Islam and environmental conservation. Environmental Conservation, 28(1), 1–9. https://doi.org/10.1017/S0376892901000017
Lahyani, F. E. (2022). Corporate board diversity and carbon disclosure: Evidence from France. Accounting Research Journal, 35(6), 721–736. https://doi.org/10.1108/ARJ-12-2021-0350
Liao, L., Luo, L., & Tang, Q. (2015). Gender diversity, board independence, environmental committee and greenhouse gas disclosure. The British Accounting Review, 47(4), 409–424. https://doi.org/10.1016/j.bar.2014.01.002
Listyorini, I., Utami, R. D., Prasojo, P., & Amanda, A. S. (2024). The role of Shariah Supervisory Board in Islamic Social Reporting disclosure. Journal of Accounting Auditing and Business, 7(2), 23–35. https://doi.org/10.24198/jaab.v7i2.53207
Lone, F. A. (2016). Objectives of Islamic finance. In Islamic Banks and Financial Institutions (pp. 66–82). Palgrave Macmillan UK. https://doi.org/10.1057/9781137515667_4
Louie, J., Ahmed, K., & Ji, X. D. (2019). Voluntary disclosures practices of family firms in Australia. Accounting Research Journal, 32(2), 273–294. https://doi.org/10.1108/ARJ-04-2016-0042
Luh, P. K., Arthur, M., Fiador, V., & Kusi, B. A. A. (2024). Gender of firm leadership and environmental, social and governance (ESG) reporting: Evidence from banks listed on Ghana Stock Exchange. Gender in Management, 39(6), 778–795. https://doi.org/10.1108/GM-03-2023-0110
Makhlouf, M. (2017). Islamic banking opportunities across small and medium enterprises in MENA: Executive summary (No. 112821). World Bank. http://documents.worldbank.org/curated/en/997581487153582013/Islamic-Banking-Opportunities-across-Small-and-Medium-Enterprisesin-MENA-Executive-Summary
Mamat, Z. E. (2019). Concept of Al-Amanah (trustworthiness) and Al-Mas’uliyyah (responsibility) for human’s character from ethical Islamic perspective. Journal of Legal, Ethical and Regulatory Issues, 22(S1).
McCune. (2023, November). Holding corporations responsible for environmental damages. McCune Wright. https://mccunewright.com/blog/2023/11/holding-corporations-responsible-for-environmental-damages/
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2021). Higher ethical objective (Maqasid al-Shari’ah) augmented framework for Islamic banks: Assessing ethical performance and exploring its determinants. Journal of Business Ethics, 170(4), 797–834. https://doi.org/10.1007/s10551-019-04331-4
Minhat, M., & Dzolkarnaini, N. (2016). Islamic corporate financing: Does it promote profit and loss sharing? Business Ethics: A European Review, 25(4), 482–497. https://doi.org/10.1111/beer.12120
Moats, M. C., Parker, S. G., Brown, T.-L., & Johnson, G. (2024). The audit committee’s role in sustainability/ESG oversight. [Article/Report].
Muttakin, M. B., Khan, A., & Subramaniam, N. (2015). Firm characteristics, board diversity and corporate social responsibility: Evidence from Bangladesh. Pacific Accounting Review, 27(3), 353–372. https://doi.org/10.1108/PAR-01-2013-0007
Muttakin, M. B., & Subramaniam, N. (2015). Firm ownership and board characteristics: Do they matter for corporate social responsibility disclosure of Indian companies? Sustainability Accounting, Management and Policy Journal, 6(2), 138–165. https://doi.org/10.1108/SAMPJ-10-2013-0042
Nurkhin, A., Rohman, A., Rofiq, A., & Mukhibad, H. (2018). The role of the Sharia Supervisory Board and corporate governance mechanisms in enhancing Islamic performance-evidence from Indonesia. Banks and Bank Systems, 13(4), 85–95. https://doi.org/10.21511/bbs.13(4).2018.08
Octavio, M. F. R., Setiawan, D., Aryani, Y. A., & Arifin, T. (2025). The relationship between corporate governance and sustainability performance: The moderating role of public attention. Asian Review of Accounting. https://doi.org/10.1108/ARA-01-2025-0009
Osei Bonsu, C., Liu, C., & Yawson, A. (2024). The impact of CEO attributes on corporate decision-making and outcomes: A review and an agenda for future research. International Journal of Managerial Finance, 20(2), 503–545. https://doi.org/10.1108/IJMF-02-2023-0092
Parker, S. G., Brown, T.-L., Johnson, G., & LLP, P. (2021, October 3). The audit committee’s role in sustainability/ESG oversight. Harvard Law School Forum on Corporate Governance. https://corpgov.law.harvard.edu/2021/10/03/the-audit-committees-role-in-sustainability-esg-oversight/
Peters, G. F., & Romi, A. M. (2013). The association between sustainability governance characteristics and the assurance of corporate sustainability reports. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2198068
Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. Harper & Row.
Platonova, E., Asutay, M., Dixon, R., & Mohammad, S. (2018). The impact of corporate social responsibility disclosure on financial performance: Evidence from the GCC Islamic banking sector. Journal of Business Ethics, 151(2), 451–471.
Pranata, M. W., & Laela, S. F. (2020). Board characteristic, good corporate governance and maqȃshid performance in Islamic banking. Journal of Islamic Monetary Economics and Finance, 6(2). https://doi.org/10.21098/jimf.v6i2.1189
Rao, K., & Tilt, C. (2016). Board diversity and CSR reporting: An Australian study. Meditari Accountancy Research, 24(2), 182–210. https://doi.org/10.1108/MEDAR-08-2015-0052
Refinitiv. (2022). ICD-Refinitiv Islamic finance development indicator report 2022: Embracing change. https://icd-ps.org/uploads/files/ICD%20Refinitiv%20ifdi-report-20221669878247_1582.pdf
Saad, S. N. H., & Abd Rahman, F. (2018). Optimizing the role and responsibility of the Shariah Committee: From Islamic finance to the halal industry. In Proceedings of the 3rd International Halal Conference (INHAC 2016) (pp. 299–313). Springer. https://doi.org/10.1007/978-981-10-7257-4_28
Said, H. B. (2024). SSB characteristics and integrated reporting quality in Islamic banks: Evidence from MENA zone. Research Square. https://doi.org/10.21203/rs.3.rs-3915247/v1
Salamun, H., & Ab Rahman, A. (2022). Leadership values and understandings from an Islamic perspective. In Leadership in a Changing World. IntechOpen. https://doi.org/10.5772/intechopen.101989
Sallemi, N. (2024). Internal governance and the sustainability development practice in Islamic financial institutions. International Journal of Disclosure and Governance. https://doi.org/10.1057/s41310-024-00246-3
Sarea, A., & Salami, M. A. (2021). Does social reporting matter? Empirical evidence. Journal of Financial Regulation and Compliance, 29(4), 353–370. https://doi.org/10.1108/JFRC-09-2020-0088
Sarkawi, A. A., Abdullah, A., & Dali, N. M. (2016). Reviewing the concept of sustainability from the Islamic perspectives. Kuala Lumpur International Islamic Studies and Civilisations (KLiISC), 9(5), 398–403.
Shari’ah Governance Framework. (2018). Shari’ah governance framework for Islamic banking institutions. State Bank of Pakistan. www.sbp.org.pk/ibd/2018/C1-Annex-A.pdf
Sitthipongpanich, T., & Polsiri, P. (2015). Do CEO and board characteristics matter? A study of Thai family firms. Journal of Family Business Strategy, 6(2), 119–129. https://doi.org/10.1016/j.jfbs.2015.01.002
Tumewang, Y. K., Supriani, I., Dewi, H. R., & Alam, M. K. (2025). An extended review on Sharia governance studies from 1985 to 2022. Journal of Islamic Accounting and Business Research, 16(2), 321–347. https://doi.org/10.1108/JIABR-11-2022-0319
Ullah, M. H., & Khanam, R. (2018). Whether Shari’ah compliance efficiency is a matter for the financial performance. Journal of Islamic Accounting and Business Research, 9(2), 183–200. https://doi.org/10.1108/JIABR-01-2016-0001
Wajdi Dusuki, A. (2008). Understanding the objectives of Islamic banking: A survey of stakeholders’ perspectives. International Journal of Islamic and Middle Eastern Finance and Management, 1(2), 132–148. https://doi.org/10.1108/17538390810880982
Wardani, M. K., & Sari, D. D. (2019). Disclosure of Islamic social reporting in Sharia banks: Case of Indonesia and Malaysia. Journal of Finance and Islamic Banking, 1(2), 105–124. https://doi.org/10.22515/jfib.v1i2.1495
Wijayanti, R., & Setiawan, D. (2022). Social reporting by Islamic banks: The role of Sharia Supervisory Board and the effect on firm performance. Sustainability Accounting and Reporting, 14(17), 1–25.
Wijayanti, R., & Setiawan, D. (2023). The role of the board of directors and the Sharia Supervisory Board on sustainability reports. Journal of Open Innovation: Technology, Market, and Complexity, 9(3), 100083. https://doi.org/10.1016/j.joitmc.2023.100083
Zeng, H., Zhang, X., Zhou, Q., Jin, Y., & Cao, J. (2022). Tightening of environmental regulations and corporate environmental irresponsibility: A quasi-natural experiment. Environment, Development and Sustainability, 24(11), 13218–13259. https://doi.org/10.1007/s10668-021-01988-8
DOI: https://doi.org/10.18860/ed.v13i2.36435
Refbacks
- There are currently no refbacks.
Editorial Office:
Megawati Soekarnoputri Building
Faculty of Economics
E-mail: eldinar@uin-malang.ac.id
Universitas Islam Negeri Maulana Malik Ibrahim Malang
E-ISSN 2622-0083
El Dinar under a CC BY SA 4.0 International License.
Member of:
Indexed By:
