FINANCIAL PERFORMANCE AND INDEPENDENT BOARD OF DIRECTORS AS DETERMINANT IN THE CONTINUITY OF CSR DISCLOSURE IN SYARIAH AND CONVENTIONAL BANKS IN INDONESIA

This item is published by Universitas Islam Negeri Sunan Ampel Surabaya

Oktaviana, Ulfi Kartika and Fitriyah, Fitriyah (2012) FINANCIAL PERFORMANCE AND INDEPENDENT BOARD OF DIRECTORS AS DETERMINANT IN THE CONTINUITY OF CSR DISCLOSURE IN SYARIAH AND CONVENTIONAL BANKS IN INDONESIA. In: Conference Proceedings: Annual International Conference on Islamic Studies (AICIS) XII, 5 – 8 November 2012, Surabaya – Indonesia.

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Abstract

The objective of this research are to analyze financial performance and independence of directors are relevant for Corporate Social Responsibility (CSR) disclosure of Islamic banks and conventional banks in Indonesia and to find significant differences exists between determinants of CSR (financial performance and independence of directors) between Islamic and conventional banks in Indonesia. The population of this research covers Islamic and conventional banks in Indonesia. Sample will taken using purposive sampling and the criteria as banking institutions which publish their annual financial report during a period of January 2007 to December 2011. Based on the criteria above, the number of banks in the sample is seven Islamic banks and ten conventional banks. Multinomial logistic regression is used to test empirically whether the CSR is highly influenced by the factors identified earlier. The results of this study resulted in two models of logistic regression, namely the category of Islamic banks not disclosing CSR and the category of Islamic Bank disclosing CSR with conventional bank category which reports CSR as reference group. For the category of Islamic Banks not disclosing CSR, company size has significant impact on the probability that Islamic bank would not disclose CSR but the probability is lower compared to its impact with conventional banks disclosing CSR and independent board of directors is found to have significant probability on Islamic banks not disclosing CSR and this would be higher than the impact of conventional banks disclosing CSR. For the category of Islamic Banks disclosing CSR, company size has a significant impact on the probability of Islamic bank disclosing CSR but it is lower in its impact than conventional banks disclosing CSR and independent board of directors has significant impact on the probability that Islamic bank would disclose CSR and the impact is lower compared to the impact on conventional banks disclosing CSR. This is consistent with the previous studies from Brammer et. al. (2004), Brown et. al. (2006), Febrina (2011), Sembiring (2005), (Khan, 2010), Suciyati (2010), Hanifa & Cooke (2002). For the two models in this research, that is Islamic banks disclosing CSR and Islamic banks not disclosing CSR relative against conventional banks disclosing CSR, it is found that ROA and leverage have an impact on CSR disclosure but not significant at .10 level. This is consistent with the previous studies Febrina (2011), (Masruki et al:2009). Nonetheless, the study provides some contribution on factors that contribute to the disclosure of CSR. Thus, future studies should expand the current model to include other factors.