Sustainability, Sharī‘ah Governance and Financial Performance: Evidence from Companies Listed on the Jakarta Islamic Index

This chapter analyzes the performance of the companies listed on the Indonesia Stock Exchange (IDX) under the Jakarta Islamic Index (JII). The purpose of our study is twofold: first, to examine the relationship between corporate sustainability practice and financial performance; second, to investigate the relationship of Islamic practice with financial performance, and thereby evaluate whether Islamic compliance moderates the relationship between corporate sustainability practice and financial performance. We analyze the performance of fifteen companies listed on the IDX Jakarta Islamic Index for five consecutive years from 2015 to 2019, based on their annual and sustainability reports. Data for financial performance is measured by three different proxies: Return on Assets, Return on Equity, and Ln Net Profit. Three Robust Ordinary Least Squares Regression Models were performed to test our research hypotheses. This study improves our knowledge since no previous study has investigated the research construct proposed and tested in this inquiry, it contributes to the current literature by providing evidence of a three-dimensional relationship between sustainability, Islamic practice and financial performance. And provides empirical insights for regulators who may utilize them as a basis for policy formulation in regulating corporate sustainability and Sharī‘ah practices.