The Effect of Islamic Social Reporting Disclosure and Company Reputation on Financial Performance with Business Ethics as a Moderating Variable

Abstract

One of the company's activities in carrying out its social activities according to an Islamic perspective is the Islamic Social Reporting disclosure. Companies that carry out social activities also aim to maintain the company's reputation. This study will analyze the effect of Islamic Social Reporting disclosure and company reputation on financial performance. The variables of Islamic Social Reporting disclosure and company reputation are moderated by business ethics. The research method used is descriptive method using the verification method approach. The sample used in this study were 11 Islamic banks in Indonesia that published annual reports from 2012-2016. The results showed that the Islamic Social Reporting Disclosure variable and the Islamic Social Reporting Disclosure variable which were moderated by business ethics had a significant effect on financial performance. Meanwhile, the company reputation variable and the company reputation variable which were moderated by business ethics did not significantly affect financial performance. In addition, business ethics as a moderating variable strengthens the influence of Islamic Social Reporting Disclosure and company reputation on financial performance. Islamic Social Reporting Disclosure variables and company reputation have a negative impact on company performance in Islamic banking because Islamic banking runs its operations emphasizing social aspects and providing greater benefits to the environment. Business ethics has a positive influence on the Islamic Social Reporting Disclosure variable and company reputation in Islamic banking so that Islamic banks that have good business ethics have better financial performance.

Keywords: Islamic social reporting disclosure, company reputation, business ethics and financial performance

DOI: 10.7176/RJFA/11-24-07

Publication date: December 31^st 2020