The effect of corporate governance and Islamic social reporting on profitability in Sharia commercial banks

Abstract

Purpose – This study aims to examine the effect of corporate governance mechanisms—comprising the Board of Commissioners, Board of Directors, Audit Committee, and Sharia Supervisory Board—alongside Islamic Social Reporting (ISR) on the profitability (Return on Assets/ROA) of Islamic commercial banks in Indonesia.

Design/methodology/approach – A purposive sampling technique was applied to select 10 Islamic Commercial Banks registered with the Indonesian Financial Services Authority (OJK) over the 2015–2019 period, resulting in 50 firm-year observations. The data were analyzed using panel data regression analysis with EViews version 9.

Findings – The results show that the board of commissioners, board of directors, audit committee, and sharia supervisory board have no significant impact on profitability (ROA). However, Islamic social reporting positively affects profitability, suggesting that greater social and ethical disclosures enhance financial performance.

Originality/value – This study adds to the sparse research on corporate governance, Islamic social responsibility, and financial performance in Indonesian Islamic banking. It uniquely isolates the effects of each governance body, showing how the Sharia Supervisory Board and voluntary ISR differently impact profitability in a dual-banking system.