The Relationship between Islamic Corporate Governance, Human Governance, Usage of Information Technology and Sustainability Reporting: Comparison of Shariah Compliant Companies in Malaysia and Indonesia

Authors

  • Hasnah Haron Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan
  • Idris Gautama So Management Department, Binus Business School, Bina Nusantara University, Jakarta 11480, Indonesia
  • Anderes Gui School of Information Systems, Bina Nusantara University, Jakarta 11480, Indonesia
  • Synthia Atas Sari Management Department, Binus Business School, Bina Nusantara University, Jakarta 11480, Indonesia
  • Nathasa Mazna Ramli Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan
  • Nurul Nazlia Jamil Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Bandar Baru Nilai, 71800 Nilai, Negeri Sembilan

DOI:

https://doi.org/10.33736/ijbs.5174.2022

Keywords:

Islamic Corporate governance, Human governance, IT Usage Index, Sustainability reporting

Abstract

This study aims to evaluate the relationship between Islamic corporate governance (ICG), human governance (HG), and information technology (IT) usage on sustainability reporting (SR) by investigating Shariah compliant companies in Malaysia and Indonesia. Data was collected from 68 manufacturing Shariah compliant companies’ annual reports for Malaysia, and 70 manufacturing Shariah compliant companies’ annual reports for Indonesia, for the year ended 2019. Descriptive and multiple regression analysis was used to analyse the data. The study found that HG Index and IT Usage Index were positive and significantly related to sustainability reporting for Shariah companies in both countries. However, ICG was not found to be significantly related to sustainability reporting for Shariah companies in Malaysia and Indonesia. This could be because the study focuses only on manufacturing companies, and in Malaysia and Indonesia, only about 24% of the companies and 13% of the companies respectively, have an ICG structure in place. The study suggests that to increase SR of Shariah compliant companies, there should be a good HG structure in place, and they should increase their level of IT usage in their business operations. Resource-Based theory can explain the relationship of IT Usage and HG to SR.

References

Abdullah, W. N., & Said, R. (2018). The influence of corporate governance and human governance towards corporate financial crime: A conceptual paper. Redefining Corporate Social Responsibility, 13, 193-215. https://doi.org/10.1108/S2043-052320180000013014

Adams, C. A., & Larrinaga‐González, C. (2007). Engaging with organisations in pursuit of improved sustainability accounting and performance. Accounting, Auditing & Accountability Journal, 20(3), 333-355. https://doi.org/10.1108/09513570710748535

Adams, C. A., & McNicholas, P. (2007). Making a difference: Sustainability reporting, accountability and organisational change. Accounting, Auditing & Accountability Journal, 20(3), 382-402. https://doi.org/10.1108/09513570710748553

Aman, A. H. L, Harun, A., & Hussein, Z. (2012). The influence of environmental knowledge and concern on green purchase intention the role of attitude as a mediating variable. British Journal of Arts and Social Sciences, 7(2), 145-167.

Andrikopoulos, A., Samitas, A., & Bekiaris, M. (2014). Corporate social responsibility reporting in financial institutions: Evidence from Euronext. Research in International Business and Finance, 32, 27-35. https://doi.org/10.1016/j.ribaf.2014.02.001

Bakar, A. B. S. A., Ghazali, N. A. B. M., & Ahmad, M. B. (2019). Sustainability reporting and board diversity in Malaysia. International Journal of Academic Research in Business and Social Sciences, 9(3), 91-99. https://doi.org/10.6007/IJARBSS/v9-i2/5663

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99-120. https://doi.org/10.1177/014920639101700108

Bharadwaj, A. S. (2000). A resource-based perspective on information technology capability and firm performance: An empirical investigation. MIS Quarterly, 24(1), 169-196. https://doi.org/10.2307/3250983

Branco, M. C., & Rodrigues, L. L. (2008). Factors influencing social responsibility disclosure by Portuguese companies. Journal of Business Ethics, 83(4), 865-701. https://doi.org/10.1007/s10551-007-9658-z

Campbell, J. M., & Park, J. (2017). Extending the resource-based view: Effects of strategic orientation toward community on small business performance. Journal of Retailing and Consumer Services, 34, 302-308. https://doi.org/10.1016/j.jretconser.2016.01.013

Cerbioni, F., & Parbonetti, A. (2007) Exploring the effects of corporate governance on intellectual capital disclosure: An analysis of European biotechnology companies. European Accounting Review, 16 (4), 791-826. https://doi.org/10.1080/09638180701707011

Charumathi, B., & Padmaja, G. (2018). The impact of regulations and technology on corporate social responsibility disclosures-evidence from Maharatna central public sector enterprises in India. Australasian Accounting, Business and Finance Journal, 12(2), 5-28. https://doi.org/10.14453/aabfj.v12i2.2

Chebbia, K., Aliedanb, M. M., & Mohammed, A. (2020). Women on the Board and Environmental Sustainability Reporting: Evidence from France. International Journal of Innovation, Creativity and Change, 14(11).

Cheng, E. C. M., & Courtenay, S. M. (2006). Board composition, regulatory regime and voluntary disclosure. The International Journal of Accounting, 41(3), 262-289. https://doi.org/10.1016/j.intacc.2006.07.001

Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organisations and Society, 32(7-8), 639-647. https://doi.org/10.1016/j.aos.2006.09.009

Christopher, T., & Filipovic, M. (2008). The extent and determinants of disclosure of global reporting initiative guidelines: Australian evidence. Journal of Contemporary Issues in Business and Government, 14(2), 17-40. https://search.informit.org/doi/10.3316/informit.003541246153078

Deegan, C. M. (2007). Financial accounting theory (2nd ed.). McGraw-Hill.

De Marez, L., & Verleye, G. (2004). Innovation diffusion: The need for more accurate consumer insight. Illustration of the PSAP scale as a segmentation instrument. Journal of Targeting, Measurement and Analysis for Marketing, 13(1), 32-49. https://doi.org/10.1057/palgrave.jt.5740130

Driver, C., & Thompson, G. (2002). Corporate governance and democracy: The stakeholder debate revisited. Journal of Management and Governance, 6(2), 111-130. https://doi.org/10.1023/A:1015721819591

Eberle, D., Berens, G., & Li, T. (2013). The impact of interactive corporate social responsibility communication on corporate reputation. Journal of Business Ethics, 118(4), 731-746. https://doi.org/10.1007/s10551-013-1957-y

El-Halaby, S., & Hussainey, K. (2015). Determinants of social accountability disclosure: Evidence from Islamic banks around the world. International Journal of Business, 20(3), 202.

Gamerschlag, R., Möller, K., & Verbeeten, F. (2011). Determinants of voluntary CSR disclosure: Empirical evidence from Germany. Review of Managerial Science, 5(2-3), 233-262. https://doi.org/10.1007/s11846-010-0052-3

Gallo, P. J., & Christensen, L. J. (2011). Firm size matters: An empirical investigation of organizational size and ownership on sustainability-related behaviors. Business & Society, 50(2), 315-349. https://doi.org/10.1177/0007650311398784

Ghazali, N. A. M. (2007). Ownership structure and corporate social responsibility disclosure: Some Malaysian evidence. Corporate Governance, 7(3), 251-266. https://doi.org/10.1108/14720700710756535

Giannarakis, G. (2014). The determinants influencing the extent of CSR disclosure. International Journal of Law and Management, 56(5), 393-416. https://doi.org/10.1108/IJLMA-05-2013-0021 https://doi.org/10.1108/IJLMA-05-2013-0021

Global Reporting Initiative (GRI) Index 2019 (English) (Report Number: 142184). (2019). The World Bank Group. http://documents.worldbank.org/curated/en/345091569568201066/Global-Reporting-Initiative-GRI-Index-2019

Grais, W., & Pellegrini, M. (2006). Corporate governance and Shariah compliance in institutions offering Islamic financial services [World Bank policy research working paper 4054]. The World Bank. https://www.researchgate.net/publication/23550056_Corporate_Governanceand_Shariah_Compliance_in_Institutions_Offering_Islamic_Financial_Services. https://doi.org/10.1596/1813-9450-4054

Grant, R. M. (1991) The resource-based theory of competitive advantage: Implications for strategy formulation. California Management Review, 33(3), 114-135. https://doi.org/10.2307/41166664

Gray, R., Kouhy, R., & Lavers, S. (1995). Constructing a research database of social and environmental reporting by UK companies. Accounting, Auditing & Accountability Journal, 8(2), 78-101. https://doi.org/10.1108/09513579510086812

Gul, F. A., & Leung, S. (2004). Board leadership, outside directors' expertise and voluntary corporate disclosures. Journal of Accounting and Public Policy, 23(5), 351-379. https://doi.org/10.1016/j.jaccpubpol.2004.07.001

Hameed Mohamed Ibrahim, S., Fatima, A. H., & Nu Nu Htay, S. (2006). Corporate governance and performance: A comparative study of Shari'ah approved and non‐Shari'ah approved companies on Bursa Malaysia. Journal of Financial Reporting and Accounting, 4(1), 1-23. https://doi.org/10.1108/19852510680001581

Hanapiyah, Z. M., Daud, S., & Abdullah, W. M. T. W. (2016). Human governance and level of corruption risk. Procedia Economics and Finance, 35, 127-135. https://doi.org/10.1016/S2212-5671(16)00017-4

Haniffa, R. (2001). Social responsibility disclosure: An Islamic perspective [Discussion paper]. University of Exeter.

Haniffa, R. M., & Cooke, T. E. (2002). Culture, corporate governance and disclosure in Malaysian corporations. A Journal of Accounting, Finance and Business Studies (ABACUS), 38(3), 317-349. https://doi.org/10.1111/1467-6281.00112

Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391-430. https://doi.org/10.1016/j.jaccpubpol.2005.06.001

Harjoto, M., Laksmana, I., & Lee, R. (2015). Board diversity and corporate social responsibility. Journal of Business Ethics, 132(4), 641-660. https://doi.org/10.1007/s10551-014-2343-0

Hashim, F., Mahadi, N. D., & Amran, A. (2015). Corporate governance and sustainability practices in Islamic financial institutions: The role of country of origin. Procedia Economics and Finance, 31, 36-43. https://doi.org/10.1016/S2212-5671(15)01129-6

Hashim, H. A., Abidin, A. F. Z., Salleh, Z., & Devi, S. S. (2020). Panel dataset of ethical commitment disclosures in Malaysia. Data in brief, 30, 105624. https://doi.org/10.1016/j.dib.2020.105624

Ho, J. L. C., & Taylor, M. E. (2007). An empirical analysis of triple-bottom-line reporting and its determinants: Evidence from the United States and Japan. Journal of International Financial Management & Accounting, 18(2), 123-150. https://doi.org/10.1111/j.1467-646X.2007.01010.x

Ho, S. S., & Wong, K. S. (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure. Journal of International Accounting, Auditing and Taxation, 10(2), 139-156. https://doi.org/10.1016/S1061-9518(01)00041-6

Huse, M. (2003). Renewing management and governance: New paradigms of governance? Journal of Management and Governance, 7(3), 211-221. https://doi.org/10.1023/A:1025004111314

Huse, M., & Rindova, V. P. (2001). Stakeholders' expectations of board roles: The case of subsidiary boards. Journal of Management and Governance, 5(2), 153-178. https://doi.org/10.1023/A:1013017909067

Imran, M., Khan, K. B., Zaman, K., Musah, M. B., Sudiapermana, E., Aziz, A. R. A., ..., & Anis, S. N. M. (2021). Achieving pro-poor growth and environmental sustainability agenda through information technologies: As right as rain. Environmental Science and Pollution Research, 20, 41000-41015. https://doi.org/10.1007/s11356-021-13630-1

Jamil, A., Mohd Ghazali, N. A., & Puat Nelson, S. (2021). The influence of corporate governance structure on sustainability reporting in Malaysia. Social Responsibility Journal, 17(8), 1251-1278. https://doi.org/10.1108/SRJ-08-2020-0310

Kauffman, R. J., & Riggins, F. J. (2012). Information and communication technology and the sustainability of microfinance. Electronic Commerce Research and Applications, 11(5), 450-468. https://doi.org/10.1016/j.elerap.2012.03.001

Khan, M. H. U. Z. (2010). The effect of corporate governance elements on corporate social responsibility (CSR) reporting: Empirical evidence from private commercial banks of Bangladesh. International Journal of Law and Management, 52(2), 82-109. https://doi.org/10.1108/17542431011029406

Kurniawan, R. D., & Asandimitra, N. (2014). Analisis perbandingan kinerja indeks saham syariah dan kinerja indeks saham konvensional. Jurnal Ilmu Manajemen, 2(4), 1356-1366.

Kuzey, C., & Uyar, A. (2017). Determinants of sustainability reporting and its impact on firm value: Evidence from the emerging market of Turkey. Journal of Cleaner Production, 143, 27-39. https://doi.org/10.1016/j.jclepro.2016.12.153

Lidyah, R. (2018). Islamic corporate governance, islamicityfinancial performance index and fraudat Islamic bank. Jurnal Akuntansi, 22(3), 437-453. https://doi.org/10.24912/ja.v22i3.398

Lewis, M. K., & Algaoud, L. M. (2003). Perbankan Syariah: Prinsip, praktik, dan prospek. PT Serambi Ilmu Semesta.

Maali, B., Casson, P., & Napier, C. (2006). Social reporting by Islamic banks. Abacus, 42(2), 266-289. https://doi.org/10.1111/j.1467-6281.2006.00200.x

Malaquias, R.F., de Oliveira Malaquias, F. F., & Hwang, Y. (2017). The role of information and communication technology for development in Brazil. Information Technology for Development, 23(1), 179 - 193. https://doi.org/10.1080/02681102.2016.1233854

McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1-18. https://doi.org/10.1111/j.1467-6486.2006.00580.x

Michelon, G. (2011). Sustainability disclosure and reputation: A comparative study. Corporate Reputation Review, 14(2), 79-96. https://doi.org/10.1057/crr.2011.10

Mohammed, R., Alwi, K., & Muhammad Jamil, C. Z. (2009). Sustainability disclosure among Malaysian Shari'ah-compliant listed companies: Web reporting. Issues in Social and Environmental Accounting, 3(2), 160-179. https://repo.uum.edu.my/id/eprint/17388 https://doi.org/10.22164/isea.v3i2.42

Murphy, M. J., & Smolarski, J. M. (2020). Religion and CSR: An Islamic "political" model of corporate governance. Business & Society, 59(5), 823-854. https://doi.org/10.1177/0007650317749222

Neu, D., Warsame, H., & Pedwell, K. (1998). Managing public impressions: Environmental disclosures in annual reports. Accounting, Organisations and Society, 23(3), 265-282. https://doi.org/10.1016/S0361-3682(97)00008-1

Nizam, H. A., Zaman, K., Khan, K. B., Batool, R., Khurshid, M. A., Shoukry, A. M., ... & Gani, S. (2020). Achieving environmental sustainability through information technology: "Digital Pakistan" initiative for green development. Environmental Science and Pollution Research, 27, 10011-10026. https://doi.org/10.1007/s11356-020-07683-x

Ooi, C. A., Setiawan, D., & Hooy, C. W. (2019). Muslim CEOs and bank risk-taking: Evidence from Indonesia. Global Finance Journal, 50, 100507. https://doi.org/10.1016/j.gfj.2019.100507

Othman, R., Thani, A. M., & Ghani, E. K. (2009). Determinants of Islamic social reporting among top Shariah-approved companies in Bursa Malaysia. Research Journal of International Studies, 12, 4-20.

Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78-92.

Purbawangsa, I. B. A., Solimun, S., Fernandes, A. A. R., & Mangesti Rahayu, S. (2020). Corporate governance, corporate profitability toward corporate social responsibility disclosure and corporate value (comparative study in Indonesia, China and India stock exchange in 2013-2016). Social Responsibility Journal, 16(7), 983-999. https://doi.org/10.1108/SRJ-08-2017-0160

Reverte, C. (2009). Determinants of corporate social responsibility disclosure ratings by Spanish listed firms. Journal of Business Ethics, 88(2), 351-366. https://doi.org/10.1007/s10551-008-9968-9

Said, R., Abdul Rahim, A. A., & Hassan, R. (2018). Exploring the effects of corporate governance and human governance on management commentary disclosure. Social Responsibility Journal, 14(4), 843-858. https://doi.org/10.1108/SRJ-06-2017-0099 https://doi.org/10.1108/SRJ-06-2017-0099

Salancik, G. R., & Pfeffer, J. (1978). A social information processing approach to job attitudes and task design. Administrative Science Quarterly, 23(2), 224-253. https://doi.org/10.2307/2392563

Salb, D., Friedman, H. H., & Friedman, L. W. (2011). The role of information technology in fulfilling the promise of corporate social responsibility. Computer and Information Science, 4(4), 2-9. https://doi.org/10.5539/cis.v4n4p2

Salleh, A., & Ahmad, A. (2010). Human governance: Bringing the meaning of integrity in the life of professional accountants [Working paper]. Universiti Putra Malaysia.

Setiawan, A., & Djajadikerta, H. (2017). Impact of internal audit function on internal control disclosure. Advanced Science Letters, 23(9), 8078-8084. https://doi.org/10.1166/asl.2017.9839

Shamil, M. M., Shaikh, J. M., Ho, P. L., & Krishnan, A. (2014). The influence of board characteristics on sustainability reporting: Empirical evidence from Sri Lankan firms. Asian Review of Accounting, 22(2), 78-97. https://doi.org/10.1108/ARA-09-2013-0060

Sharif, M., & Rashid, K. (2014). Corporate governance and corporate social responsibility (CSR) reporting: An empirical evidence from commercial banks (CB) of Pakistan. Quality & Quantity, 48(5), 2501-2521. https://doi.org/10.1007/s11135-013-9903-8

Silvius, A. G., van den Brink, J., & Smit, J. (2009). Sustainability in information and communications technology (ICT) projects. Communications of the IIMA, 9(2), 33-45.

Snell, S. A., Youndt, M. A., & Wright, P. M. (1996). Establishing a framework for research in strategic human resource management: Merging resource theory and organisational learning. Research in Personnel and Human Resources Management, 14, 61-90.

So, I. G., Haron, H., Gui, A., Princes, E., & Sari, S. A. (2021). Sustainability reporting disclosure in islamic corporates: Do human governance, corporate governance, and it usage matter? Sustainability, 13(23), 13023. https://doi.org/10.3390/su132313023

Sudaryati, D., & Eskadewi, Y. (2012). Pengaruh corporate governance terhadap tingkat pengungkapan corporate social responsibility di bank Syariah. Jurnal Ekonomi dan Bisnis, 11(01), 14-28.

Tarquinio, L., Raucci, D., & Benedetti, R. (2018). An investigation of global reporting initiative performance indicators in corporate sustainability reports: Greek, Italian and Spanish evidence. Sustainability, 10(4), 897. https://doi.org/10.3390/su10040897

Ting, I. W. K., Azizan, N. A., & Kweh, Q. L. (2014). Human governance and firm's leverage decision: Evidence from Malaysian listed companies. Pertanika Journal of Social Sciences & Humanities, 22(3), 879-890.

Unerman, J., & Bennett, M. (2004). Increased stakeholder dialogue and the internet: Towards greater corporate accountability or reinforcing capitalist hegemony? Accounting, Organisations and Society, 29(7), 685-707. https://doi.org/10.1016/j.aos.2003.10.009

Vitezić, N., Vuko, T., & Mörec, B. (2012). Does financial performance have an impact on corporate sustainability and CSR disclosure? A case of Croatian companies. Journal of Business Management, 5, 40-47.

Yaseen, H., Iskandrani, M., Ajina, A., & Hamad, A. (2019). Investigating the relationship between board diversity & corporate social responsibility (CSR) performance: Evidence from France. Academy of Accounting and Financial Studies Journal, 23(4), 1-11.

Wan Abdullah, W. M. T., Daud, S., Hanapiyah, Z. M. (2020). Human governance and corruption risk in Malaysia public sector. Global Business and Management Research. An International Journal, 12(4), 721-731.

Downloads

Published

2022-12-19

How to Cite

Hasnah Haron, Idris Gautama So, Anderes Gui, Synthia Atas Sari, Nathasa Mazna Ramli, & Nurul Nazlia Jamil. (2022). The Relationship between Islamic Corporate Governance, Human Governance, Usage of Information Technology and Sustainability Reporting: Comparison of Shariah Compliant Companies in Malaysia and Indonesia. International Journal of Business and Society, 23(3), 1443–1461. https://doi.org/10.33736/ijbs.5174.2022