ISSN: 2222-6990
Open access
Shariah governance disclosure constitutes a critical mechanism through which Islamic financial institutions (IFIs) demonstrate religious credibility and accountability to all stakeholders. Although Bank Negara Malaysia (BNM) has issued the Shariah Governance Framework (SGF) since 2010, there is limited empirical evidence on the actual implementation of Shariah governance disclosure across the institutional structure. Previous research mainly examined the disclosure behaviour of Islamic banks (IBs) with other categories of IFIs including Takaful operators, Islamic windows and Development Financial Institutions (DFIs) being ignored. This study fills this gap by exploring how Shariah governance disclosure across the entire population of Malaysian IFIs has developed and changed since the implementation of SGF. This study conducts systematic content analysis on 2016 annual reports, analysing Shariah governance disclosure across 12 components adopted from BNM regulation as a benchmark. The year 2016 was selected to indicate the maturation of disclosure during the 5-6 years of SGF implementation period. The findings indicate strong institutional-level heterogeneity in disclosure, with intensity ranging between 203 (highest) and a mere two (lowest) sentences. The disclosure ratio is dominated by the Function and Conduct of Shariah Committee members with 56.7%, while crucial control dimensions such as Zakat information (34 sentences) and Shariah non-compliance risk (41 sentences) are significantly underreported. This indicates that the strategic management of legitimacy is driven by an emphasis on the ceremonial aspects of governance rather than the actual control processes. Full-fledged IBs and DFIs are better performing than Islamic windows and Takaful operators, indicating that reporting intensity is systematically associated with centrality of the institutional business model and stakeholder visibility. This study provides empirical contribution through its first comprehensive review of all Malaysian IFI categories’ reporting patterns and, practically, by specifying regulatory intervention priorities for BNM in improving Shariah governance transparency and accountability throughout Malaysia’s Islamic finance sector.
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