Hasan Mukhibad, Prabowo Yudo Jayanto, Meilani Intan Pertiwi, Ahmad Nurkhin, Bayu Bagas Hapsoro, Christian Wiradendi Wolor
Purpose – Islamic law, as the fundamental framework for Islamic bank operations, emphasizes the transparency of bank performance information to the ummah (stakeholders). This study aims to prove the effect of performance disclosure (shariah compliance, social, environmental and economic performance) on profitability, customer loyalty and cost of debt. Design/methodology/approach – This study uses 23 Islamic banks in Indonesia and Malaysia observed for 15 years (2009–2023) and analyzed using panel data regression. Findings – We report that disclosure performance negatively impacts the cost of debt. However, by testing each performance disclosure indicator, we find that disclosure of Shariah and environmental compliance performance positively impacts customer loyalty. In addition, environmental performance disclosure negatively impacts the cost of debt. In the long term, we report that customer loyalty increases in line with the expansion of shariah, social, environmental and economic compliance performance disclosures. In addition, environmental performance disclosure has a positive effect on return on assets (ROE). Research limitations/implications – This study is limited to Islamic banks in Indonesia and Malaysia, which are predominantly Muslim. Muslims are the primary market for Islamic banks and a major factor in determining Islamic bank legitimacy. Practical implications – We recommend that regulators encourage banks to expand bank performance disclosure by issuing regulations and laws, such as creating rankings for Islamic banks’ disclosure performance or rewarding banks that provide broader disclosures. Thus, it will help stakeholders to access bank performance information. Originality/value – The contribution of this study is to develop the concept of business sustainability through comprehensive performance disclosure, including Shariah compliance and social, environmental and economic performance. © 2024 Emerald Publishing Limited
Faculty of Economics and Business, Universitas Negeri Semarang, Semarang, Indonesia; Faculty of Economics, Universitas Negeri Jakarta, Jakarta, Indonesia
