Shari’acorporate governance disclosure of Malaysian IFIS

Purpose - This paper aims to examine the extent of theShari’acorporate governance disclosure in the annual report of Islamic financial institutions (IFIs) in Malaysia to determine the significant differences in this disclosure between the local and foreign-owned IFIs, small and large size IFIs and IFIs belong to Islamic and conventional holding companies. Design/methodology/approach - All 16 IFIs in Malaysia were selected to analyse the extent of disclosure in their annual reports on issues related toShari’acorporate governance. For this purpose, an index ofShari’acorporate governance disclosure for IFIs was created based on adapting Sulaimanet al.(2015). The index consists of 127 items classified into 14 dimensions. The scoring of the disclosed items is binary, where a score of “1” if disclosed and “0” if it was not disclosed in the annual report. Findings - The result shows no significant differences in theShari’acorporate governance disclosure between the local and foreign-owned IFIs, small and large size IFIs and IFIs belonging to Islamic and conventional holding companies. However, further examination shows that there was a significant difference in the disclosure of the risk management committee dimension between the large and small IFIs and investment account holders dimension between the conventional and Islamic holding companies. Research limitations/implications - The results provide new emerging evidence that deviates from many prior empirical research studies, which document the domination of Islamic-based IFIs in the corporate governance practices, as compared with their conventional financial institutions that venture into Islamic finance. This study, however, was conducted on only 16 IFIs in a one-year period, i.e. 2013. Future research should consider data from a larger number of IFIs that involve a number of countries with more than one year of data to have a better understanding of the extent ofShari’acorporate governance disclosure. Practical implications - This study provides an indicator to the stakeholders of Islamic finance that the Islamic-based IFIs and conventional IFIs are equal and cannot be differentiated based on theShari’acorporate governance disclosure. For Islamic-based IFIs, as a pioneer in Islamic banking and finance industry, they need to take more efforts in adopting theShari’agovernance framework issued by the Central Bank of Malaysia (BNM), namely, theShari’areview, audit and risk management. Originality/value - This study is original, as it includes the latest requirements by theShari’agovernance framework issued by the BNM, namely, theShari’areview, audit, risk management and research functions in its research instrument. In addition, this research also scrutinised the disclosure in detail of all the dimensions constructed in the governance index.