Corporate Governance and Islamic Social Responsibility Disclosure In Kuwaiti Shariah Compliant Financial Institutions

Abstract

This study examines the relationship between corporate governance characteristics and the extent of Islamic social responsibility disclosure in Kuwait. The annual reports of 40 Shariah-compliant financial institutions listed on the Kuwait Stock Exchange in 2010 are examined. Four major corporate governance characteristics are investigated: 1) the existence of a Shariah supervisory board; 2) the number of board members; 3) the proportion of non-executive directors to the total number of directors on the board; and 4) role duality. The extent of Islamic social responsibility disclosure is measured using a self-constructed index. The index consists of 46 Islamic information items. Multivariate regression analyses are used to examine the relationships between these characteristics and the level of Islamic social responsibility disclosure. The results show that Shariah-compliant financial institutions disclosed 18% on average of the possible voluntary disclosure items. The findings report that Islamic social responsibility disclosure increases with the presence of a Shariah supervisory board, but decreases with role duality. Other corporate governance characteristics were found not to be significant in the study.