PDF CONFERENCE PROCEEDING - Universitas Islam Sultan Agung Semarang

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6 th ASEAN UNIVERSITIES

INTERNATIONAL CONFERENCE ON ISLAMIC FINANCE

(6 th AICIF)

14th - 15th November 2018

New World Makati City, Manila, Philippine

CONFERENCE

PROCEEDING

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CORPORATE GOVERNANCE

ISLAMIC BANKING AND CAPITAL MARKET

MONEY PAYMENT SYSTEM &

FINANCIAL INNOVATION

TAKAFUL & RISK MANAGEMENT ISLAMIC SOCIAL FINANCE

ARABIC PAPERS 1. 2.

3.

4. 5.

6.

SUB THEMES

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ISLAMIC BANKING

CAPITAL MARKET AND

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Sub Theme Islamic Banking and Capital Market

No Paper ID Paper Title Author(s) Affiliation

1 6th AICIF:

011-003

Does Islamic Banking Promote Financial Inclusion among Women in OIC Member Countries?

T.A.R Tengku Humaira, S.Shahida,

M.N. Shifa

Universiti Kebangsaan Malaysia

2 6th AICIF:

008-007

Potentiality of Islamic Deposit Insurance System in Nigeria: A Lesson from Malaysia

Shamsuddeen Muhammad Ahmad, Salisu Hamisu, Abuja

University Malaysia Perlis (UNIMAP)

3 6th AICIF:

021-012

The Islamic Banking Sectors Contribution towards Symbiotic Halal Ecosystem

Nurul Aini Muhamed, Nathasa Mazna Ramli, Hakimah Yaacob, Nurmaezah Omar

Universiti Sains Islam Malaysia

4 6th AICIF:

023-014

Potentials and Challenges of Sukuk as a Liquidity Management

Instrument in Bangladesh

Md. Mizanur Rahman Islamic Bank Bangladesh Limited

5 6th AICIF:

028-017

Does Islamic Finance Follow Financial Hierarchy? Evidence from the Sukuk Primary Market

Mamoru Nagano Seikei University

6 6th AICIF:

044-035

The Potential of Islamic Syndicated Financing in Supporting Funding Needs of Green Infrastructure Projects

Aida Noraini Manap, Rusni Hassan

International Islamic University Malaysia

7 6th AICIF:

060-050

Adoption of Value-Based

Intermediation through Integrated Reporting: Evidence from Islamic Banks in Malaysia

Nathasa Mazna Ramli, Nurul Aini Muhamed

Universiti Sains Islam Malaysia

8 6th AICIF:

168-163

Zero Waste Village as One of the Contributions of Islamic Banking in the Sustainable Development Goals Program

Rusdiana Priatna, Aisyah Assalafiah

Sekolah Tinggi Ekonomi Islam (STEI) Tazkia, Indonesia

9 6th AICIF:

167 - 162

Alternative Financing Modes for Higher Learning Institutions in Malaysia – Socially Responsible Investment (SRI) Sukuk & Social Impact Bonds (SIB)

Engku Rabiah Adawiah Engku Ali,

Rusni Hassan, Salina Kassim,

Syed Marwan Mujahid Syed Azman,

Nor Razinah Mohd Zin

International Islamic University Malaysia

10 6th AICIF:

163-154

The Performance of Stocks Portfolio Based on Ethical Investment in Indonesia (Study On Islamic Index and Socially Responsible Index)

Lilis Renfiana, Syafiq M. Hanafi, Darmawan

UIN Sunan Kalijaga, Indonesia

11 6th AICIF:

166-157

Fiinancial Reporting Dimensions of Intangibles in the Context of Islamic Finance

Syed Musa Syed Jaafar Alhabshi,

Sharifah Khadijah Syed Agil, Mezbah Uddin Ahmed

12 6th AICIF:

096-086

Virtual Currencies: Anaysis from

Shariah Validity Hakimah Yaacob

Universiti Islam

Sultan Sharif Ali

(UNISSA), Brunei

Darussalam

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13 6th AICIF:

067-056

The Strategy of Settlement of Murabahah Financing Issues

Maya Indriastuti, Indri Kartika

Universitas Islam Sultan Agung (UNISSULA), Indonesia 14

6th AICIF:

154-143

Measuring Intellectual Capital with Adjusted Residual Income Model (RIM) to Predict Firm Profitability

Prasojo, Sofyan Hadinata UIN Sunan Kalijaga, Indonesia

15 6th AICIF:

157-148

A Study of Implementing Green Sukuk in Indonesia

Miftakhus Surur, Andi Sabrina

16 6th AICIF:

158-149

Trust-Loyalty Relationship Model in Islamic Banking: Evidence from Indonesia

Afif Zaerofi, Popy Rufaidah, Dwi Kartini, Faisal Afiff

Sekolah Tinggi Ekonomi Islam (STEI) Tazkia, Indonesia 17

6th AICIF:

153-150

Ijarah Maushufah fiz Zimmah (IMFZ) and it`s Application in Financial Transaction

Lailatis Syarifah, Muhfiatun

UIN Sunan Kalijaga, Indonesia

18 6th AICIF:

077-064

An Analysis of the Effect of Murabahah, Mudharabah,

Musyarakah and Ijarah Financing on Profit

Osmad Muthaher, Tyas Amantha Kusumadewi

Universitas Islam Sultan Agung (UNISSULA), Indonesia

19 6th AICIF:

078-065

Islamic Social Reporting Holistic Approach on Sharia Banking in Indonesia

Luluk Muhimatul Ifada, Bedjo Santoso,

Maya Indriastuti

20 6th AICIF:

080-067

Operational Risks Disclosure of Islamic Banks: Selected Cases from Indonesia

Hendri Setyawan

Universitas Islam Sultan Agung (UNISSULA), Indonesia 21

6th AICIF:

150-140

Transforming Marawi's Transactions

to Islamic Finance Minombao Ramos-Mayo Mindanao State University

22 6th AICIF:

089-077

Role of Accounting Information and Principles of Sharia Financing Assessment in Financing Decisions

Devi Permatasari

23 6th AICIF:

049-041

The Internal and External

Challenges and the way forward to conversion of Islamic Banking in Libya

Mahmoud A S Abusloum, Khaliq Ahmad,

Nabel Bello

24 6th AICIF:

066-057

Interest-Free Banking and Finance in Brunei Darussalam:Present Realities and Future Prospects

Jibrail Bin Yusuf, Hassan Shakeel Shah, Mohammad Ayaz,

Jabal Muhammad Buaben

University of Cape Coast

25 6th AICIF:

015-115

Factors Affecting Earning

Management in Indonesian Islamic Banking (Empirical Studies on Islamic banks In Indonesia period 2013-2016)

Prima Shofiani

Universitas 'Aisyiyah Yogyakarta, Indonesia

26 6th AICIF:

139-134

Risks Management and

Performance of Indonesian Islamic and Conventional Banks

Saiful

Bengkulu

University,

Indonesia

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27 6th AICIF:

018-009

Islamic Juristic Analysis of Default ukk: A Case of Dana Gas Court Judgments Abstract

Saheed Abdullahi Busari, Akhtarzaite bint Abdul Aziz, Luqman Zakariyah, Muhammad Amanullah

28 6th AICIF:

085-083

The Impact of Islamic Social

Reporting on Financial Performance of Sharia Banks in Indonesia

Sutapa, Hendri S, Puji Harto

29 6th AICIF:

102-089

Islamic Banking in Iraq: An Overview Zeiad Amjad Abdulrazzak Aghwan

Universiti Islam Sultan Sharif Ali (UNISSA), Brunei Darussalam

30 6th AICIF:

103-090

Analysis Relation Between Service Quality with Post Purchase Behavior: Empirical Study in Bank Syariah Mandiri Depok, Indonesia

Reny Fitriana Kaban,

Puji Hadiyati Perbanas Institute

31 6th AICIF:

109-100

Why do Indonesian Islamic Banks Take The Risk?

Yaser Taufik Syamlan, Ar-Rizal Azinuddin

32 6th AICIF:

115-104

Earning Quality and Potential Bankruptcy of Islamic Banks:

Indonesia versus Malaysia

Grandis Imama Hendra

33 6th AICIF:

113-113

The Interconnections between Islamic Wealth Management and Sustanaible Finance

Nurizal Ismail, Siti Aisyah

Sekolah Tinggi Ekonomi Islam (STEI) Tazkia, Indonesia 34

6th AICIF:

132-119

Micro-finance in Islamic Banking:

Theories and Practices Pakistan a Case in Point

Bashir Ahmad, Ms Maawra Salam

Bahria University, Karachi Campus, Pakistan

35 6th AICIF:

161-158

Musharakah Sukuk Documentation Defects and Its Default Implications:

Case Study of Villamar Sukuk

Ahmed Mohamed Mokhtar, Aznan Hasan

36 6th AICIF:

161-152

Sukuk Issuance for Meeting Basel III Capital Adequacy Requirements: A Shariah Analysis of Maybank Tier 1 sukuk

Nabil Bello, Aznan Hasan

37 6th AICIF:

135-123

Islamic home financing instruments in Malaysia: The emerging issue of financial (un)affordability

Mohd Zaidi Md Zabri, Razali Haron

Universiti Sains Malaysia

38 6th AICIF:

073-124

Malaysian Stock Market Analysis on Conventional and Shariah-based Equity Unit Trusts Performances

Lalua Rahsiad,

Aqilah Nur Safiah Zainal, Ayesha Abdul Khalid

Management &

Science University, Malaysia

39 6th AICIF:

140-130

The Effect of Corporate Governance on Islamic Banking Performance using Maqasid Index Approach in Indonesia

Audia Syafaatur Rahman, Razali Haron

40 6th AICIF:

142-133

Source of Procyclicality in Dual Banking System: The Case of Indonesia

Naahilah Hunafaa Al- Qudsy, Khoirul Umam Atika Rukminastiti Masrifah

University of

Darussalam

(UNIDA) Gontor,

Indonesia

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41 6th AICIF:

130-122

Do Islamic Banking Really Benefit

from Foreign Direct Investment? Siti Lulu Hayati

University of Darussalam (UNIDA) Gontor, Indonesia

42 6th AICIF:

014-006

Relationship Between Service Quality and Customer Satisfaction

Dzuljastri Abdul Razak, Fodol Mohamed Zakaria, Ali Ahmad Burhan Ahmed Abdilahi Jama

43 6th AICIF:

149-141

A Shari'ah Appraisal of the Ijarah Sukuk Structure as Implemented in Islamic Capital Markets

Auwal Adam Sa'ad

International

Islamic University

Malaysia

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1

6^thASEAN Universities International Conference on Islamic Finance (AICIF), Manila, Philippines 14th & 15th November 2018

The Impact of Islamic Social Reporting on Financial Performance of Sharia Banks in Indonesia

Sutapa

^a

Hendri S

^b

a Universitas Diponegoro Semarang

bEconomics Faculty, Univeristas Islam Sultan Agung Semarang

Abstract

This study emphasizes the influence of institutional ownership and firm size on Islamic Social Reporting disclosures and their implications for financial performance. This study aims to obtain empirical evidence about the influence of institutional ownership and firm size on the disclosure of Islamic Social Reporting (ISR) and its effect on financial performance in Islamic banking in Indonesia.

The population of this study is all Islamic Banks in Indonesia 2014-2017. The sample of this study is Islamic Banks in Indonesia. The sampling census method is used as the sampling method in this study. There are eleven banks and 44 observations were obtained. Classic assumption tests are carried out for data analysis and regression analysis to test hypotheses.

The results of this study indicate that institutional ownership has a significant effect on the level of Islamic Social Reporting disclosure. While the size of the company does not have a significant influence, but Islamic Social Reporting affects the financial performance of Islamic banking.

Keywords: Institutional Ownership, Company Size, Islamic Social Reporting, Financial Performance

1. Introduction

The existence of Islamic banking in Indonesia is a reflection of the need for an alternative banking system that can provide more positive contributions to improve the stability of the national banking system. This makes the Indonesian government establish regulations and accounting standards for Islamic banks. In addition, the rapid development of Islamic banks also encourages Islamic banks to be able to report their social responsibility disclosures in accordance with Islamic sharia principles to assess their financial performance. By expressing social responsibility, it will have an impact on banking performance.

Besides that, Islamic Social Reporting is also an important thing for the reputation and performance of Islamic financial institutions, because by disclosing ISR, Islamic financial institutions that can express their ISR very well will be seen as an institution that can be trusted by Muslim communities in channeling their funds. The financial performance of the bank is a true picture of the bank's financial condition in a certain period, including aspects of the distribution of funds or the collection of funds. Loyalty and trust of fund owners towards banks is a very helpful factor and facilitates the bank management in developing a good business strategy. The fund owner can withdraw funds at any time and move to another bank if the owners of the funds have less trust in the bank concerned, their loyalty is very low. Assessment of the performance of a bank can be done by analyzing its financial statements. The bank's financial statements in the form of balance sheets provide information to external parties, such as the public, investors and the central bank, regarding the description of its financial position. This balance sheet report can be used by external parties to assess the amount of risk that exists in a bank. Then the income statement provides an

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2 overview of the bank development that is related.

Related to the disclosure of social responsibility of a sharia entity, lately, it is widely discussed about Islamic Social Reporting. Islamic Social Reporting is a sharia-compliant social performance reporting standard. Islamic Social Reporting defines as a special framework for reporting social responsibility in accordance with Islamic principles. The purpose of Islamic Social Reporting is as a form of corporate accountability to Allah SWT and the community and also to increase transparency of business activities by presenting relevant information with regard to the spiritual needs of Muslim investors or sharia compliance in decision making.

Islamic Social Reporting consists of CSR standard items set by the AAOIFI (Accounting and Auditing Organization for Islamic Institutions) and then developed by researchers regarding CSR items that should be revealed by an Islamic entity. The ISR Index contains 6 (six) themes including investment and finance, products and services, employees, society, environment, and corporate governance. Each theme has indicators which all of them have 43 indicators. There are several factors that can influence the ISR disclosure between the level of institutional ownership and company size.

The study of social responsibility disclosures conducted by Haniffa (2002) explains that there are limitations to the social reporting framework carried out by conventional institutions. This limitation covers spiritual and moral aspects, because in sharia principles it does not only focus on material aspects such as zakat, sharia compliance status and transactions that are free from the elements of riba, as well as social aspects such as alms, waqf, qordul hasan, and also the disclosure of the worship in the company environment. Therefore we need a social reporting framework based on sharia principles in developing Islamic Social Reporting to achieve the objectives of accountability and transparency.

Some of the researches that have been carried out on Islamic Social Reporting (ISR), such as Astuti (2014) who examined the factors that influence the disclosure of Islamic Social Reporting on Islamic Banks in Indonesia. The results of the study show that the size of the company influences the disclosure of Islamic Social Reporting. Research conducted by Ratna Aditya Ningrum et. al. (2013) showed that institutional ownership influences the disclosure of Islamic Social Reporting (ISR), while the type of industry is not an important factor influencing Islamic Social Reporting (ISR) significantly.

Aldehita Purnasanti Maulida et.al. (2014) conducted the research on companies listed in the Jakarta Islamic Index (JII), company size factors have no effect on Islamic Social Reporting (ISR) disclosures. Irman Firmansyah and Eko Hariyanto (2014), the results showed that the size of the company and the board of directors had a positive effect on the social disclosure of Islamic banking, while institutional ownership had no effect on the social disclosure of Islamic banking in Indonesia. The research results by Rita Rosiana et.al. (2015) showed that firm size has a significant influence on the disclosure of Islamic social reporting.

Research of Abi Rafdi Arsyi in 2015 stated that Islamic Social Reporting had no significant effect on financial performance. It is different from the research conducted by Harahap et al. (2017) who showed that ISR has a significant effect on financial performance.

Based on these studies there are some inconsistent results so that further testing is needed to determine the consistency of findings, if it is applied on the different environmental conditions.

The research question of this study is whether institutional ownership, company size, and Islamic Social Reporting affect financial performance. This study purposes to test the effect of institutional ownership, firm size and disclosure of Islamic Social Reporting on Financial Performance

2. Literature Review and Hypothesis Development

Organizational legitimacy can be seen as something that the community gives to the company and something that the company wants or desires from the community (Chariri and Ghozali, 2007). The legitimacy theory focuses on encouraging companies to ensure that the activities and performance carried out by the company can be accepted by the community.

Stakeholder theory is a theory that is generally related to the ways that companies use to manage their stakeholders (Gray et al. 1997 in Chariri and Ghozali, 2007). One of the strategies used by the company is to maintain relationship among stakeholders by disclosing social and environmental information.

The ISR index contains a compilation of CSR standard items set by AAOIFI (Accounting and

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Auditing Organization for Islamic Financial Institutions) which was then developed by researchers regarding CSR items that should be revealed by Islamic entity (Haryanti, 2012). There are six themes of disclosure in the ISR index. They are investment and finance, products and services, labor, social, environmental and corporate governance.

There are many factors that influence the level of ISR disclosure. In this study, profitability, firm size, environmental performance and leverage are predicted to influence the leverage of the ISR in terms of the extent to which information from ISR items is disclosed in the company's annual report.

2.1 Institutional Ownership on the Islamic Social Report (ISR) Disclosure

The companies with large institutional ownership are better able to monitor management performance.

Institutional investors have power and experience and are responsible for implementing the principles of good corporate governance to protect the rights and interests of all shareholders so that they demand the company to communicate transparently. Thus, institutional ownership can improve the quality and quantity of voluntary disclosures. It means that institutional ownership can encourage companies to increase the social disclosure and environmental responsibility (Hariyanti, 2012). The research results of Ratna Aditya Ningrum et. al. (2013) revealed that institutional ownership has a positive influence on Islamic Social Reporting (ISR) disclosure. Based on the description above, the hypothesis is formulated:

H1: Institutional ownership has a positive effect on Islamic Social Reporting (ISR) disclosure.

2.2 Company Size toward Islamic Social Report (ISR) Disclosure

The larger the size of the company, the more available information available to investors in making decisions regarding investment in the company (Siregar and Utama, 2005). Company size is the level of identification of a large or small company. Larger companies carry out more activities, and then cause a greater impact. The greater the size of the company, the more capital is invested so that large resources and funds within the company tend to have a wider demand for information on the company's reporting. The research result of Rita Rosiana et.al. (2015), shows that the size of the company measured by using total assets affects the ISR disclosure. Based on the description, the following hypothesis is formulated:

H2: Firm size has a positive effect on Islamic Social Reporting (ISR) disclosure.

2.3 The Effect of Islamic Social Report (ISR) Disclosure on Financial Performance

ISR is a form of company activity in achieving its short and long-term goals, the company must base its decisions not only on the basis of financial factors but also must be based on social and environmental consequences. So that the company's social responsibility is closely related to sustainable development. In addition, sustainable development has a long-term impact on the company.

So, the better the company discloses corporate social responsibility, the investor will know that the company cares about the environment, and for the foreseeable future, the condition of the company will be better related to environmental issues, and willing to increase its investment so as to make the company's market value get better, and vice versa. In accordance with stakeholder theory which states that all are involved in disclosing the company's financial performance. Thus, the hypothesis used is:

H3: Islamic Social Reporting Disclosure has a positive effect on Financial Performance 3. Research Methodology

The population used in this study is all Islamic banks in Indonesia. The sampling technique uses a purposive sampling method, namely the Sharia commercial bank that publishes annual report of 2015- 2017. The type of data used is secondary data derived from annual financial statements, where the data can be obtained on the site of each Islamic commercial bank.

Data collection techniques in this study were carried out with the documentation study method that is the data collection through documents, in this case, the annual report data was obtained through the site of each Sharia commercial bank and literature study, namely data collection as the basis of theory and previous research through books, research previously, as well as other written sources related to the

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information needed. Data analysis methods in this study include descriptive statistics, data normality test, multicollinearity test, autocorrelation test and heteroscedasticity test. Then, the hypothesis testing used multiple linear regression analysis.

3.1 Operational Definition of Variable and Measurement 3.1.1 Islamic Social Reporting Disclosure

In this study, the Islamic Social Reporting index was used to determine the level of Islamic Social Reporting disclosure in the annual report of Islamic bank using the research index of Haniffa (2002) and modified the disclosure items in Othman et al. (2009). Each disclosure item has 1 or 0 score. Score of 1 will be given if the Islamic Social Reporting item is found in the company data and a score of 0 will be given if the Islamic Social Reporting item is not found in the company data.

The way to do a comparative assessment between Islamic Social Reporting (ISR) disclosures is to do a comparison between the Islamic Social Reporting disclosures that have been done by the company and the maximum number of Islamic Social Reporting disclosures must be disclosed by the company. Thus, ISR is formulated as:

Total of Disclosure Score

Disclosure level = --- Total of Maximum Score

3.1.2 Financial Performance

In assessing banking performance, it can be done by looking at the financial statements. This assessment can use the Return on Assets ratio.

ROA is a comparison between net income after tax and total assets. Mathematically, ROA can be formulated as follows: (Sartono, 2008).

Net Income

ROA = --- x 100%

Total of Assets

3.1.3 Institutional Ownership

Institutional ownership is a share ownership by the government, financial institutions, legal entities, foreign institutions, trust funds and other institutions at the end of the year (Shien, et. Al 2006) in Winanda (2009). In this study, institutional ownership variables were obtained from the percentage of voting rights held by institutional ownership. It is then measured by the following formula:

Score of Institutional Score Institutional Ownership = --- x 100%

Total of Outstanding Score

3.1.4 Company Size

The company size referred to the size of the company as measured by the total assets of the company.

The company's total assets are obtained from the statement of financial position at the end of the period in the company's annual report. This is because the total assets show the amount of ownership of assets owned by the company which is seen from the sum of current assets with fixed assets so that total assets are considered more able to present whether a company is in the category of large or small companies.

According to Widiawati and Raharja (2012), the company size is formulated as follows:

Size = ln (Total of assets)

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5 3.1.5 Multiple Linear Regression Analysis

Ghozali (2011) states that in regression analysis, beside it measures the strength of the relationship between two or more variables, it also shows the direction of the relationship (influence) between the independent variable and the dependent variable. This study will examine the factors that influence the disclosure of the Islamic Social Report (ISR) and its implications for financial performance in Islamic banking in Indonesia.

ISR = α + β1KM + β2UP + ε KK = α + β1ISR + ε

Which are:

ISR : level of ISR disclosure α : Constant

β1-β3 : Regression Coefficient KI : Institutional Ownership UP : Company Size

KK : Financial Performance ε : Error Terms

4. Result and Discussion 4.1 Normality Test Result

Normality Test aims to test whether the tested variable has a normal distribution or not. A good regression model is to have a normal or near normal distribution. This assumption was tested using the Kolmogorov- Smirnov Test. The following is the results of the Kolmogorov-Smirnov Test of this study:

Table 1 Normality Test

Source: SPSS data processed, 2018 4.2 Multicollinearity Test Result

Multicollinearity test is used to determine whether there is a linear relationship between independent variables in the regression model or not (Sujarweni, 2014). The model is declared as free of multicollinearity interference if it has a VIF value under 10 or tolerance up to 0.1. The results of multicollinearity testing are as follows:

Kolmogorov- SmirnovZ

Asymp. Sig.

(2-tailed) Institutional Ownership

1,148 0,513

Company Size 0,753 0,428

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6 Table 2 Multicollinearity Test

Model Collinearity

Statistics Status

Tolerance VIF (Constant)

Institutional Ownership .432 3.301 There is no

multicollinearity occur

Company Size .678 2.221 There is no

multicollinearity occur Source : SPSS data processed, 2017

4.3 Heteroscedasticity Test Result

Heteroscedasticity test aims to test whether in the regression model there is a residual variance inequality from the one observation to another observation. Test results are as follows:

Table 3 Heteroscedasticity test

Model T Sig. Status

Institutional Ownership .375 .679 There is no heteroscedasticity occur

Company Size .622 .518 There is no heteroscedasticity

occur Source: SPSS data processed, 2017

Based on the table above, it can be seen that the significance value is> 0.05. This can be stated that there is no heteroscedasticity in this research model.

4.4 Multiple Linear Regression Analysis

Based on the results of calculations using SPSS, the results obtained in table 4:

Table 4

Results of SPSS Multiple Linear Regression and T-Count Value

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.

B Std. Error Beta

(Constant) .091 .239 .381 .717

Institutional

Ownership .031 .001 .000 .002 .998

Company Size .014 .011 .239 1.279 .048

a. Dependent Variable: Islamic Social Report (ISR) company

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Simple SPSS Regression results and t-Count values

Model

Unstandardized Coefficients

Standardized Coefficients

t Sig.

B Std. Error Beta

1 (Constant) .642 .054 11.779 .000

ISR .046 .041 .351 1.126 .059

a. Dependent Variable: Financial Performance 4.5 The Effect of Institutional Ownership on ISR Disclosures

The regression model testing conducted in this study shows that the institutional ownership variable has t-count of 0.002 and a significance of 0.998> 0.05. So it can be concluded that H1 in this study was rejected.

The test results on the variables of institutional ownership show that institutional ownership does not have a significant influence on the disclosure of Islamic Social Reporting (ISR) in Islamic banking in Indonesia. This condition occurs because the average institutional ownership in this study has relatively small majority.

This reflects that institutional ownership in Indonesia has not considered social responsibility as one of the criteria for making investments so that institutional investors tend not to press companies to disclose ISR in detail in the company's annual report.

Institutional ownership that has capital in Islamic banking with a small or large percentage, need to have the social responsibility where the company can give authority to institutional ownership to play a role in providing input on Islamic Social Reporting (ISR) disclosure.

If it is compared to the previous studies, the results of this study are not consistent with the research conducted by Ningrum (2013), which proves that the size of institutional ownership affects Islamic Social Reporting (ISR) disclosure.

4.6 The Effect of Company Size on ISR Disclosure

The regression test model conducted in this study shows that the company size variable has a t-count of 1.297 and a significance of 0.048 <0.05. So it can be concluded that H2 in this study was accepted.

The test results on variable firm size show that the size of the company has a positive and significant effect on the disclosure of Islamic Social Reporting (ISR) in Islamic banking in Indonesia.

The influence of company size on Islamic Social Reporting disclosure indicates that the greater the size of the company, it will be the higher the Islamic Social Reporting disclosed by the company.

This is because the larger the size of the company, it will be the higher the demand for information disclosure compared to smaller companies. By disclosing more information, the company tried to imply that the company had implemented sharia principles well. In addition, larger companies generally have more funding, facilities and human resources compared to smaller companies.

So the results of this study are consistent with the results of research conducted by Rosiana et.al (2015), which show that the size of the company measured by using total assets affects Islamic Social Reporting (ISR) disclosure.

4.7 The Effect of ISR Disclosure on Financial Performance

The regression test model conducted in this study shows that the institutional ownership variable has t- count of 1.126 and a significance of 0.059 <0.05. So it can be concluded that H3 in this study was rejected.

The test results show that Islamic Social Reporting has no effect on the financial performance of Islamic banking in Indonesia. This reflects that ISR disclosure is one of the needs that must be done

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by the company. So that the company considers that ISR disclosure is an obligation that must be carried out.

ISR describes the social functions of Islamic banks both from the perspective of positive law and Islam. The results of this study indicate that Islamic banks that can carry out their social functions well and are accompanied by their disclosures in annual reports can have a positive impact on financial performance. The better the Islamic bank in informing its social activities, the financial aspects will increase as well. Islamic Pilgrimage in the form of Zakat, Infaq, Alms, and Waqf is the main program of CSR Islamic banks. Islamic banks can act as social intermediary institutions for the program. Through a good infrastructure network owned by Islamic banks, the social program will be better. Social function and commercial functions attached to Islamic banks can be integrated so that they become mutually beneficial. Social performance can improve the financial performance or vice versa.

5. Conclusion and Suggestion 5.1 Conclusion

The conclusions in this study are:

1. Institutional ownership has no effect on ISR disclosure because the majority of institutional ownership is still relatively small so it has not considered social responsibility as one of the criteria in making investments.

2. Company size affects the ISR disclosure because the larger the size of the company, it will be the higher the demand for information disclosure.

3. ISR disclosure does not affect the financial performance of sharia banking.

5.2 Suggestion

The suggestions that can be given are:

1. Islamic banks can disclose Islamic Social reporting more broadly and better

2. For regulators, they should to be able to create a system and standard regulations in determining ISR disclosures for sharia-based companies.

3. The future researcher can use other variables that can influence ISR disclosure and financial performance.

References

An, Yi; Davey, Howard; and Eggleton, Ian R. C., The Effects of Industry Type, Company Size and Performance on Chinese Companies’ IC Disclosure: A Research Note, Australasian Accounting, Business and Finance Journal, 5(3), 2011, 107-116. Available at:http://ro.uow.edu.au/aabfj/vol5/iss3/8

Aldehita Purnasanti Maulida et.al. 2014. Analisis Faktor–faktor yang Mempengaruhi Pengungkapan Islamic Social Reporting (ISR). Jurnal SNA 17 Mataram, Lombok Universitas Mataram. 24-27 Sept 2014.

Amirul Khoirudin. 2013. Corporate Governance Dan Pengungkapan Islamic Social Reporting Pada Perbankan Syariah di Indonesia. Accounting Analysis Journal, Volume 2 Nomor 2. Semarang:

Universitas Negeri Semarang.

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