Islamic governance and leverage: the interacting role of corporate social responsibility disclosure

Purpose: This study aims to analyze the relationship between Islamic governance (IG) and leverage and examine the interaction of corporate social responsibility disclosure (CSRD) in the relationship between IG and leverage. Design/methodology/approach: This study used 444 observational data comprising Asian, European and African Islamic banks (IBs) and analyzed using the regression analysis method to answer the research hypothesis. Findings: This study finds that IG had a significant positive effect on leverage, indicating that it can increase the leverage of IBs. In other words, IG boosts the public confidence to entrust their funds to IBs through current accounts and savings. However, this study shows that CSRD weakens the relationship between IG and leverage. In addition, this study includes the control variables of board size, Islamic supervisory board size and company size, where all three variables showed their effect on leverage. These results were obtained through additional analysis by categorizing our sample based on CSRD. Research limitations/implications: The results of this study show that IG significantly positively affects IB leverage globally. This can be used as a basis for policymakers to include the ICG variable in analyzing IBs leverage. The weakness of this study is the use of IG variables based on disclosure so that IG components that affect leverage cannot be analyzed accurately. Future research can use the IG variable by using specific IG component values such as the number of meetings, member attendance and remuneration of SSB members in analyzing IB leverage globally. Originality/value: To the best of the authors’ knowledge, this research is the first study to discuss the interaction of CSRD with IG on leverage in Islamic banking in Asia, Europe and Africa, thus adding to the existing literature on Islamic banking.