Islamic Social Reporting: From the Perspectives of Corporate Governance Strength, Media Exposure and the Characteristics of Sharia Based Companies in Indonesia and its Impact On Firm Value

Abstract

Islamic Social Reporting (ISR) is a social reporting that involves not only a holistic expectation of the society regarding the role of the companies in the community but also a spiritual perspective. This study objective to obtain empirical evidence about the influences of corporate governance strength, media exposure, firm size, and profitability to the extent of Islamic Social Reporting and to find out the impact of ISR on firm value. To measure the extent of Islamic Social Reporting, the researchers used a checklist that had been developed based on the related rules and previous research. This study employed purposive sampling method from companies listed in Jakarta Islamic Index (JII) during 2012-2015. There are 67 companies which fulfill the criteria as the research samples. Meanwhile, the data analysis was conducted with Generalized Structured Component Analysis (GSCA). GSCA analysis is one of the Structural Equation Modellings (SEM) which is based on component (Component Based SEM). The results of this study show that corporate governance strength and profitability have positive significance on Islamic Social Reporting. However, firm size has negative significance while media exposure has no significant influence on Islamic Social Reporting. Furthermore, ISR is able to mediate the correlations of corporate governance strength, firm size, and profitability towards firm value.

Good Corporate Governance, Capital Adequacy, Financing Risk, Profitability and Islamic Social Reporting (ISR) of Sharia Commercial Banks in Indonesia

“…This is the widening of sharia-based social responsibility as a form of corporate responsibility from an economic perspective, including a commitment to God, humans and the environment [1]. This reporting emerged due to the community's strong desire towards the company to open up its social activities and the public awareness of the importance of reporting on social activities [26]. Islamic Social Responsibility (ISR) item used in this study belongs to Cahya [26]…”

“…This reporting emerged due to the community's strong desire towards the company to open up its social activities and the public awareness of the importance of reporting on social activities [26]. Islamic Social Responsibility (ISR) item used in this study belongs to Cahya [26]…”

“…Agency theory explains that there is a contractual relationship within the company [26]. Principals leave the company's management to agents to maximize company performance for the company owners' benefit.…”

“…Previous studies show that capital adequacy can reduce the risk of financing loss [24] and increase profitability [25]. The Islamic Social Responsibility (ISR) item used in this study is classified as Cahya [26] because it has been tested on companies recorded in the Reporting (ISR) variable. The reason for using the variables of good corporate governance and capital adequacy is agency theory, which at there is an information gap in the principal and agent contract relationship so that the company owner has to pay agency fees to supervise and control the agent's actions [21].…”

“…Previous studies show that capital adequacy can reduce the risk of financing loss [24] and increase profitability [25]. The Islamic Social Responsibility (ISR) item used in his study is classified as Cahya [26] because it has been tested on companies recorded in the Jakarta Islamic Index (JII). However, this is still a little applied, especially in Islamic commercial banks.…”