Effect of Characteristics of Board of Directors on Corporate Social Responsibility Disclosure by Islamic Banks: Evidence from Gulf Cooperation Council Countries

Corporate social activities have become major subjects because of their effects on the quality of life of citizens, in particular, and on society at large. Currently, there is an increased awareness of social responsibility due to the challenges faced by financial institutions (particularly Islamic banking) globally. This paper examines the influence of characteristics of the board of directors, that is, board size, board composition, and the separation of the roles of chief executive officer (CEO) and chairman, on corporate social responsibility (CSR) disclosure. After controlling bank size, financial performance and the relevant public, the research focuses on 53 annual reports of Islamic banks of Gulf Cooperation Council (GCC) countries. Based on the framework of legitimacy theory, the findings show that CSR disclosure has a negative and insignificant relationship with board composition. By contrast, the study found a positive association, although insignificant, between CSR disclosure and other characteristics of the board of directors (board size and separation of the roles of CEO and chairman). With regards to the controlled variables, the study indicates that bank size and financial performance have a positive and significant influence on CSR disclosure, while the relevant public has no effect. Therefore, the results indicate that the corporate governance structure of a board of directors within Islamic banks of the GCC region does not play a major role in CSR disclosure, largely due to family control. These findings suggest a need to improve best practice of corporate governance for Islamic financial institutions by imposing additional constraints on the board of directors’ characteristics. The importance of this evidence is that both policy makers and investors will be more aware and will understand better the role of the board of directors in relation to CSR disclosure. © Authors