Corporate social responsibility disclosures (CSRDs) in the banking industry: A study of conventional banks and Islamic banks in Malaysia

• Main Authors: Lui, Tze Kiat, Zainuldin, Mohd Haniff, Wahidudin, Ahmad Nazri, Foo, Chuan Chew
• Format: Article
• Published: Emerald 2021
• Subjects: Business; HG Finance
• Online Access: http://eprints.um.edu.my/26305/
• Institution: Universiti Malaya

Purpose The purpose of this study aims to empirically examine the corporate social responsibility disclosure (CSRD) levels of conventional and Islamic banks in Malaysia. Additionally, as Malaysian banks have different shareholding patterns that are more highly concentrated than those in the developed economies, this study also investigates the impact of ownership concentration on CSRD in both types of banks. Design/methodology/approach This study employs hand-collected corporate social responsibility (CSR) data from the annual and sustainability reports of 21 conventional banks and 16 Islamic banks in Malaysia during 2010-2017. The data are then run using the pooled ordinary least square (OLS) with robust standard errors and robust regressions models together with all possible factors determining CSRD in the banking sector. Findings This study discovers that Islamic banks disclose a higher level of total CSRD than their conventional counterparts after controlling a number of important determinants of CSRD. These results remain consistent for four different dimensions of CSRD, i.e. employees, communities, environment and products and services. In relation to the impact of ownership concentration on CSRD level, the results show that high ownership concentration reduces the level of CSRD by Malaysian banks. However, in an additional interaction test, the result exhibits a complementary relationship between Islamic banks and ownership concentration in influencing CSRD level. Research limitations/implications This study finds that the principle of Islamic accountability has been internalised by Islamic banks, and shaped them to put equal emphasis on the disclosure of CSR practices and the financial information disclosure. Practical implications It is recommended for all banks to ensure the integration of a more comprehensive ethical system, such as theological ethical values in every aspect of their business activities. The findings from this study also highlight the necessity for the central bank to increase their monitoring role, especially towards banks with a more concentrated ownership structure by limiting the size of shareholdings by any particular types of owners. Originality/value Only a few studies have compared CSR practices between these two types of banks, and most of them are descriptive and qualitative in nature. This study is the first that uses a robust model with a high R-squared value, which control for all possible factors determining CSRD in the banking sector.