Corporate governance and Islamic banks’ products and services disclosure

Rehab Grassa, Raida Chakroun, Khaled Hussainey

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    The main objective of this paper is to examine the effect of corporate governance on Islamic banks (IBs) products and services (P&S) disclosure. We run a computer based content-analysis upon the annual reports for a sample of 78 IBs operating in 11 countries over the period from 2004 to 2012 to find the number of P&S statements. We identify the levels and trends of P&S disclosure. We, also, use regression analysis to identify the factors affecting P&S disclosure in IBs. Our paper’s findings suggest that there has been a significant improvement of P&S disclosure over time. Our study’s results show a positive association between P&S disclosure and Shariah board size; board size; CEO tenure, duality in position, blockholders and investment account holders. However, they show a negative association between P&S disclosure and institutional ownership. In addition, it appears that board independence does not affect significantly banks’ P&S disclosure. We find, also, that bank performance, the bank age, the leverage, the listing and country transparency index have a positive effect on the P&S disclosure. While the adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards and the Islamic finance share have a negative effect on the P&S disclosure. This study offers an original contribution to corporate disclosure literature by being the first to develop and investigate P&S disclosure for a large sample of IBs during a long period of time. It links P&S disclosure 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, in order to promote P&S disclosure. Moreover, our findings support the theoretical predictions of the stakeholder-agency theory. This study’s empirical evidence enhances the understanding of the corporate social responsibility (CSR) disclosure environment in general and the P&S disclosure environment in particular for IBs. This study is the first one that tends to measure P&S disclosure 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 P&S disclosure with IBs corporate governance characteristics
    Original languageEnglish
    Pages (from-to)75-89
    Number of pages15
    JournalAccounting Research Journal
    Issue number1
    Early online date21 May 2018
    Publication statusPublished - Jun 2018


    • IBs
    • computer based content analysis
    • P&S disclosure
    • annual reports
    • corporate governance
    • CSR


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