The Corporate Ethical Identity of Shari’ah Compliant Companies on Islamic Corporate Social Responsibility Disclosure

Abstract

The paper attempts to assess the level of Islamic corporate social responsibility (i-CSR) disclosure for the Shari’ah Compliant Companies (ShCCs) and to examine the relationship between the corporate ethical identity (CEI) of the ShCCs with the i-CSR disclosure. In doing so, the study developed an i-CSR disclosure index that was based on the CSR framework introduced by Bursa Malaysia in 2006 and incorporated it with the five values of Maqasid Shari’ah and Maslahah. In addition, this study employed the CEI index that was developed by Haniffa and Hudaib (Account Commer Financ: Islam Perspect J 6(1/2):1–71, 2007) and Said, Daud, Radjeman and Ismail (Procedia Econ Financ 7(Icebr):230–235, 2013). The content analysis was used in the study and a sample of 187 ShCC annual reports for the years ended 2008 until 2013 were used. In this study, the STATA was applied to assess the level of i-CSR disclosure and to test the relationship between CEI and i-CSR disclosure. Based on the descriptive analysis of the i-CSR disclosure, the result indicates that the level of i-CSR disclosure for the protection of faith (Al-Din), overall, was at a very minimal level. While the result of the relationship between CEI and i-CSR disclosure after being statistically controlled by firm size (proxied by total assets) and profitability (proxied by return on assets, net profit margin, and return on equity) showed that CEI was strongly significant at β = + 0.449, p < 0.01. Thus, it implies that the more the ShCCs emphasized their CEI as Islamic-based companies, the higher their i-CSR disclosure. Therefore, by providing the activities which achieve the dimensions of Maqasid Shari’ah and Maslahah that give benefits and meaning to the ummah, the image of the ShCCs will be improved.