Developing a Corporate Governance Disclosure Index for Islamic Financial Institutions

Abstract

Despite the heightened discussion on the importance of good governance in the development of Islamic Financial Institutions (IFIs), the type of governance indicators that may be applied to IFIs has rarely being discussed. More importantly, the need to measure the quality of corporate governance (CG) using a disclosure index is undeniably pertinent. Accordingly, this study attempts to develop a CG disclosure index from a stewardship perspective for IFIs. Specifically, the disclosure index is developed using the guidelines issued by the Central Bank of Malaysia (BNM), the standards on CG promulgated by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) and the framework introduced by the Islamic Financial Services Board (IFSB). The comprehensive index developed in this study highlights a “best practice” model of CG disclosure for IFIs.