ANALYSING BANKING COMPLIANCE FROM SOCIAL AND ETHICAL PERFORMANCE (MAQASID SHARIAH PERSPECTIVE): EVIDENCE FROM ISLAMIC AND CONVENTIONAL BANK IN INDONESIA

• Main Author: Muhammad
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/71762
• Institution: Institut Teknologi Bandung

Using the Shariah (Islamic legal rulings) and its higher ethical objectives namely the maqasid shariah, the purpose of this paper is to analyze the success of Banking in Indonesia. First, we examine how ethical and social considerations can improve a bank's bottom line using the maqasid shariah index (for shariah bank) and limited maqasid shariah index (for conventional bank) , which emphasizes disclosures regarding education, social justice, and redistribution of wealth. We assess the ethical and social performance of selected banks in Indonesia from its annual reports. Second, using Indonesia as a case study, we investigate how far IBs and CBs have come in achieving maqasid shariah goals over the past five years. Third, create a model using panel regression data to determine the relationship between maqasid sharia and the financial performance of a bank. For this reason, it is important to evaluate whether or not financial institutions actually do secure social good and socioeconomic justice. With the help of content analysis, we were able to collect the information we needed from the annual reports of the selected banks, and then we used the Simple Additive Weighting (SAW) technique to calculate the sample's MSI score. This supports the findings of the literature that IBs prefer financial returns over their ethical and social impact. Empirical evidence suggests that conventional performance measurements do not truly reflect IBs’ higher ethical objectives and create a deficiency of attaining maqasid shariah performance in these banks. This study extends the previous literature on evaluating the performance of banks beyond the financial return to include their ethical and social identity based on the maqasid shariah scale, particularly over the past five years. The result reveal that there is a financial cost to achieving the maqasid shariah, as in the model generated from the panel data regression which shows a significant negative relationship between MSI and ROA for Islamic banks. Different results were obtained in analyzing conventional banks and mixed banks (Islamic banks and conventional banks) using the Limited MSI (LMSI). LMSI has a significant positive relationship to ROA in both conventional banks and Islamic banks. This happens because the elements used in MSI and LMSI calculations are different.