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Corporate governance and Islamic banks’ products and services disclosure

Author

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  • Rihab Grassa
  • Raida Chakroun
  • Khaled Hussainey

Abstract

Purpose - The purpose of this paper is to examine the determinants of Islamic banks (IBs) product and services disclosure (PSD). Design/methodology/approach - A computer-based content analysis is run upon the annual reports for a sample of 78 IBs operating in 11 countries from 2004 to 2012 to find the number of product and services statements. The levels and trends of PSD are identified. A regression analysis to identify the factors affecting PSD in IBs is also used. Findings - The findings suggest that there has been a significant improvement of PSD over time. The results show a positive association between PSD andShariahboard size, board size, chief executive officer (CEO) tenure, duality in position, blockholders and investment account holders. However, they show a negative association between PSD and institutional ownership. In addition, it appears that board independence does not affect significantly banks’ PSD. It is also found that the bank performance, bank age, leverage, listing, adoption of international financial reporting standards, adoption of Accounting and Auditing Organization for Islamic Financial Institutions and country transparency index have a positive effect on the PSD. Originality/value - This study offers an original contribution to corporate disclosure literature by being the first to develop and investigate PSD for a large sample of IBs during a long period of time. It links P&S with bank corporate governance characteristics. The findings have many important policy implications. More specifically, this paper encourages regulators in the studied countries to improve corporate governance mechanisms in their Islamic banking systems through the optimization of ownership structure, CEO’s characteristics and the board’s characteristics, to promote PSD. Moreover, the findings support the theoretical predictions of the generalized agency theory. This study’s empirical evidence enhances the understanding of the corporate social responsibility disclosure environment in general and the PSD environment in particular for IBs. This study is the first one that measures PSD in the annual reports for a large cross-countries sample of IBs during a long period of time. It is also the first one that links PSD with IBs corporate governance mechanisms.

Suggested Citation

  • Rihab Grassa & Raida Chakroun & Khaled Hussainey, 2018. "Corporate governance and Islamic banks’ products and services disclosure," Accounting Research Journal, Emerald Group Publishing Limited, vol. 31(1), pages 75-89, May.
    • Handle: RePEc:eme:arjpps:arj-09-2016-0109
    DOI: 10.1108/ARJ-09-2016-0109
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    Citations

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    Cited by:

    1. Elamer, Ahmed A. & Ntim, Collins G. & Abdou, Hussein A. & Pyke, Chris, 2020. "Sharia supervisory boards, governance structures and operational risk disclosures: Evidence from Islamic banks in MENA countries," Global Finance Journal, Elsevier, vol. 46(C).
    2. Kok, Seng Kiong & Akwei, Cynthia & Giorgioni, Gianluigi & Farquhar, Stuart, 2022. "On the regulation of the intersection between religion and the provision of financial services: Conversations with market actors within the global Islamic financial services sector," Research in International Business and Finance, Elsevier, vol. 59(C).

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