Shari'ahdisclosures in Malaysian and Indonesian Islamic banks

Purpose - – The paper aims to contribute to the discussion onShari'ahgovernance systems by examining the extent of disclosure on theShari'ahSupervisory Board (SSB) as well as the content of the Board's report in the annual reports of 23 Islamic banks in Malaysia and Indonesia. The paper also investigates the disclosures aboutzakat(Islamic levy). Design/methodology/approach - – The study is a cross-sectional analysis of annual report disclosures in the year 2009. The paper uses both disclosure indices and content analysis to measure the extent of disclosures about SSB andzakat. The paper also tests hypotheses examining the relationship between SSB characteristics and the extent of the SSB-related andzakatdisclosures. Findings - – The results indicate that SSB-related andzakatdisclosures are still limited, with only four banks disclosing more than half of the SSB Index. What is noticeable is the low level of disclosure on sensitive matters. Among the factors associated with SSB-related disclosures are cross-membership with other SSBs and the expertise of SSB members in accounting, banking, economics or finance . - Originality/value Originality/value - – The study is the first to provide an in-depth analysis ofShari'ahdisclosures in Malaysian and Indonesian Islamic banks. As such, this study makes an important contribution to the debate onShari'ahgovernance systems and has implications for regulators and standard setters. The Malaysian and Indonesian standard setters could play an important role in ascertaining appropriate disclosure requirements relating to the SSB as the study suggests that the level of disclosure is less than expected. The evidence also suggests the need for mandatory enforcement of standards on these types of disclosures.