Unlocking Profitability Potential: Investigating the Impact of Social Responsibility, Financial Disclosure, and Good Governance in Islamic Banking in Indonesia

Abstract

The corporation is primarily responsible for navigating profitability routes. This study looks at the impact of social responsibility, financial disclosure, and good governance on company profitability in Indonesian Islamic banking. The data includes financial statements and annual reports from 14 Islamic banks listed on the Indonesia Stock Exchange from 2018 to 2021. The 44 data points were chosen using a purposive sampling approach. The data were examined using the panel data regression technique. The best model was selected using the Hausman test. The findings of this study show that Islamic Bank Financial Reporting (IBFR) and Good Islamic Bank Governance (GIBG) have a favorable influence on Islamic Bank Profitability (IBP); however, Islamic Bank Social Responsibility (IBSR) impacts negatively. The outcomes of this study show that IBFR and GIBG are the most important drivers in boosting the profitability of Indonesian Islamic banks. Banks may attract depositors and investors by following IBFR and GIBG policies, which improve their financial performance and profitability. However, it is noteworthy that IBSR exhibits a contrasting influence, as the study reveals its negative impact on profitability. The findings suggest that higher levels of IBSR activity correspond to a decline in the performance of Islamic Commercial Banks. These insights shed light on the strategic considerations for Islamic banks, highlighting the significance of robust financial reporting practices and strong governance frameworks. Keywords: Islamic bank social responsibility, Islamic bank financial reporting, good Islamic bank governance, Islamic bank profitability