Social reporting in Islamic Financial Institutions (IFIs) in Malaysia

Abstract

Reporting of social performance of Islamic financial institutions (IFIs) has been the interest of the accounting information users. This study explores the perceptions of Muslim and non-Muslim accountants who are the members of Malaysian Institute of Accountants (MIA) on the issue of social reporting in Islamic financial institutions. The study also examines the social reporting practices in annual reports of selected IFIs to identify the gaps between perceptions of accountants and actual social reporting. The independentsamples T- test is conducted to identify whether or not there is any differences in perceptions between Muslim and non-Muslim accountants. The finding reveals significant differences between Muslim and non-Muslim accountants in perceived social reporting in terms of main purposes (H1), objectives of social responsibility (H2), motivations (H4), approach to establish (H5), social items (H6), and forms used to report (H7). H3 on perceived reasons of why the IFIs do not disclose social information is rejected, whereby Muslim and non-Muslim accountants share similar opinion. In content analysis, the selected IFIs are categorised into five segments namely, Local Islamic Banks, Foreign Islamic Banks, Islamic Subsidiaries of Commercial Banks, Commercial Banks with Islamic Window, and Investment Banks with Islamic Window. The results of content analysis are reviewed by social categories and volume of disclosure. By social categories, the result reveals majority of IFIs disclose employee category. By volume of disclosure, the segment of Local Islamic Banks highly disclose social items and score the highest mean number of words relating social disclosure. In conclusion, there is gap between what is been perceived to be disclosed by accountants and actual social reporting in IFIs.