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Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports

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Abstract

Islamic Banks (IBs) are considered as having ethical identity, since the foundation of their business philosophy is closely tied to religion. In this article, we explore whether any discrepancy exists between the communicated (based on information disclosed in the annual reports) and ideal (disclosure of information deemed vital based on the Islamic ethical business framework) ethical identities and we measure this by what we have termed the Ethical Identity Index (EII). Our longitudinal survey results over a 3-year period indicate the overall mean EII of only one IB out of seven surveyed to be above average. The remaining six IBs suffer from disparity between the communicated and ideal ethical identities. We further found the largest incongruence to be related to four dimensions: commitments to society; disclosure of corporate vision and mission; contribution to and management of zakah, charity and benevolent loans; and information regarding top management. The results have important implications for communication management if IBs are to enhance their image and reputation in society as well as to remain competitive.

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Abbreviations

AAOIFI:

The Accounting and Auditing Organisation for Islamic Financial Institutions

ABB:

Al-Baraka Bank

ADIB:

Abu Dhabi Islamic Bank

ARB:

Al-Rajhi Bank

BIB:

Bahrain Islamic Bank

DIB:

Dubai Islamic Bank

EII :

Ethical Identity Index

IB(s):

Islamic bank(s)

KFH:

Kuwait Finance House

SIB:

Shamil Islamic Bank

SSB:

Shari’ah Supervisory Board

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Authors and Affiliations

  1. Bradford University School of Management, Emm Lane, Bradford, BD9 4JL, U.K.

    Roszaini Haniffa & Mohammad Hudaib

Authors
  1. Roszaini Haniffa
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  2. Mohammad Hudaib
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Correspondence to Mohammad Hudaib.

Additional information

Roszaini Haniffa is a Senior Lecturer and Head of Accounting and Finance at the Bradford University School of Management. She holds a PhD from Exeter University and has published papers in Abacus, Journal of Accounting and Public Policy, Journal of Business Finance and Accounting and other journals. Her research interests focus on social responsibility reporting, corporate governance, international accounting and the Islamic perspective of accounting. Ros has reviewed papers and is a member on the editorial board of several journals.

Mohammad Hudaib is a Lecturer in Accounting at the Bradford University School of Management and holds a PhD from Essex University. He has previously taught at Exeter University and prior to his teaching career, was an auditor in Saudi Arabia. He has published papers on auditing and corporate governance in Journal of Business Finance and Accounting. His current research interests include auditing, Islamic perspective of accounting, accounting theory and ethics.

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Haniffa, R., Hudaib, M. Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports. J Bus Ethics 76, 97–116 (2007). https://doi.org/10.1007/s10551-006-9272-5

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