The Effect of Islamic Corporate Social Responsibility, Shariah Compliance, Firm Size and Sharia Supervisory Board on Profitability of Sharia Commercial Banks in Indonesia

Transcription

1. THE EFFECT OF ISLAMIC CORPORATE SOCIAL RESPONSIBILITY , SHARIAH COMPLIANCE, FIRM SIZE AND SHARIASUPERVISORY BOARD ON PROFITABILITY OF SHARIA COMMERCIAL BANKS IN INDONESIA Yuni Krisnawati1, Erlina2, Khaira Amalia Fachrudin3 1,2,3 Universitas Sumatera Utara Yunikrisnawati1@gmail.com Abstact: The purpose of this study was to find out and analyze the influence of Islamic corporate social responsibility, shariah compliance, Firm size and the shariah supervisory board partially and simultaneously on the profitability of sharia commercial banks in Indonesia. The population of this research is as many as 13 sharia commercial banks in Indonesia with 2011 to 2017 observation years. Samples were selected using saturated sample method. Data is processed using panel data regression statistical test methods. The results of this study prove that Islamic corporate social responsibility, Islamic income ratio and Firm size partially have a positive and significant effect on profitability at Islamic commercial banks in Indonesia. While the profit sharing ratio, zakat performance ratio and sharia supervisory board have a positive and not significant effect on profitability in sharia commercial banks in Indonesia. Simultaneously Islamic corporate social responsibility, Islamic income ratio, profit sharing ratio, zakat performance ratio, Firm size and sharia supervisory board have a significant effect on profitability in Islamic commercial banks in Indonesia. Keyword: Islamic corporate social responsibility, Islamic income ratio, profit sharing ratio, zakat performance ratio, Firm size, sharia supervisory board, profitability 1. INTRODUCTION The development of Islamic banking institutions has increased since the issuance of Law No. 7 of 1992 concerning banking. In 1992, there were only 1 Sharia Commercial Bank operating in Indonesia, namely Bank Muamalat Indonesia and 9 Sharia Rural Banks. Then in 2008 the government succeeded in making a new regulation governing Islamic banking namely Law No. 21 of 2008. After the issuance of this regulation, the development of Islamic bank institutions has increased from year to year. This is evidenced by the increase in the number of Islamic banking in 2017 to 13 Sharia Commercial Banks, 21 Sharia Business Units, and 167 Islamic People's Financing Banks. With the progress of its impressive development, which has achieved an average asset growth of more than 65% per year in the last five years, it is expected that the role of the Islamic banking industry in supporting the national economy will be increasingly significant. Asset growth shows that Islamic Commercial Banks in Indonesia are growing rapidly. However, the controversy is that there is a phenomenon that Sharia Commercial Banks have lower ROA values than Conventional Commercial Banks.
2. From previous studies there were differences in research results . In addition to the differences in the results of previous research, there were other problems. This can be seen in the following table 1.1. Table 1.1 Value of Islamic Corporate Social Responsibility (ICSR), Islamic Income Ratio (IsIR), Profit Sharing Ratio (PSR), Zakat Performance Ratio (ZPR), Firm Size and Sharia Supervisory Board (SSB) Years 2013 2014 2015 2016 2017 ICSR % 0,52 0,55 0,55 0,57 0,57 IsIR % 0,99 0,98 0,97 0,99 0,99 PSR % 0,29 0,32 0,34 0,36 0,36 ZPR % 0,001 0,005 0,004 0,006 0,006 Size % 15,63 15,44 15,50 15,61 15,71 SSB % 0,64 0,62 0,66 0,57 0,72 ROA % 2,00 0,80 1,15 1,20 1,55 Source: 2017 Financial Services Authority Based on the table above, the value of Islamic corporate social responsibility (ICSR), Islamic income ratio (IsIR), profit sharing ratio (PSR), zakat performance ratio (ZPR), Firm size, and Sharia Supervisory Board fluctuate from year to year. In Sharia Commercial Banks it is hoped that if Islamic corporate social responsibility (ICSR) increases, ROA will also increase. Table 1.1 shows that Islamic corporate social responsibility (ICSR) has increased from 2013 to 2014 by 0.52% to 0.55%. However, ROA decreased from 2013 by 2.00% to 0.80% in 2014. In Islamic Commercial Banks it is expected that if the Islamic Income ratio (IsIR) increases, ROA also increases. Table 1.1 shows that the Islamic Income ratio (IsIR) in 2014 was 0.98%, down to 0.97% in 2015. However, the value of ROA increased from 2014 by 0.80% to 1.15% in in 2015. The same thing also happened to the value of profit sharing ratio (PSR) and zakat performance ratio (ZPR). If the profit sharing ratio (PSR) and zakat performance ratio (ZPR) increase, ROA also increases. In 2013 and 2014 the value of the profit sharing ratio (PSR) increased from 0.29% to 0.32% and the zakat performance ratio (ZPR) of 0.001% to 0.005%. Meanwhile, the value of ROA decreased from 2.00% in 2013 to 0.80% in 2014. For the Sharia Supervisory Board (SSB) it has a positive effect on ROA where if SSB increases, ROA also increases. In table 1.1 shows that in 2015 the SSB value was 0.66% and decreased to 0.57% in 2016. However, the value of ROA has increased from 2015 by 1.15% to 1.20% in 2016. Based on this, a study entitled "The Effect Of Islamic Corporate Social Responsibility, Shariah Compliance, Firm Size And Sharia Supervisory Board On Profitability Of Sharia Commercial Banks In Indonesia". 2. 2.1 LITERATURE REVIEW Stakeholder Theory Stakeholder theory says that a Firm is not an entity that only operates for its own interests, but must provide benefits to stakeholders (shareholders, creditors, consumers, suppliers, government, society, analysts and other parties). Thus the
3. existence of a Firm is strongly influenced by the support provided by stakeholders to the Firm (Choriri, 2007). Stakeholder theory in this study is used to explain corporate social responsibility where disclosure of corporate social responsibility (CSR) has a positive impact on the growth of profitability of Islamic banks if Islamic banks express their social responsibility to stakeholders. This will increase stakeholder trust in Islamic banking services. From this, loyalty will emerge from the community towards Islamic banks and the use of services in Islamic banks will increase through consideration of the assessment of reports on disclosure of social responsibility (Maria, 2015). 2.2 Stewardship Theory In the theory of stewardship, managers will behave according to common interests. When the steward and owner's interests are not the same, the steward will try to cooperate rather than oppose it. Stewardship theory has the roots of psychology and sociology that are designed to explain situations where managers are stewards and act in the interests of the owner (Donaldson & Davis, 1991). Stewardship Theory in this study is used to explain the Islamic income ratio and profit sharing ratio. Islamic income ratios sourced from bank operations in a halal way can eliminate people's doubts, so that it will influence the depositor's decision to choose or continue to save in Islamic banks. If the Islamic income ratio increases, the profitability of Islamic banks will also increase (Hasanah, 2015). Profit sharing ratio is a ratio that is assessed from the financing made by Islamic banks. When financing the profit sharing carried out in accordance with the contract provisions and there is no fraud. Then the level of profit sharing shared will also be appropriate. If financing is good, the profitability of Islamic banks will also increase from the profit sharing system. The higher the level of profit sharing, the more people will channel funds to Islamic banks (Meilani et al, 2016). 2.3 Syariah Enterprise Theory Sharia Enterprise Theory (SET) not only cares about individual interests (in this case shareholders), but also other parties. Therefore, Syariah Enterprise Theory has a great concern for stakeholders. According to Sharia Enterprise Theory, stakeholders include Allah, humans, and nature (Endah, Andraeny, & Rahmayati, 2015). In this research shariah enterprise theory is used to explain the effect of the variable zakat performance ratio on profitability in Islamic banks. The implication, namely where Islamic banks in carrying out their operations there are fulfillment of spiritual aspects, namely zakat performance ratio as a form of servitude to obtain the pleasure of Allah and to bring mercy to all the contents of nature. For the performance of zakat distribution, if the higher or increasing wealth owned by Islamic banks, the zakat issued by banks will also increase. Through increasing the wealth of Islamic banks, this will affect the profitability of Islamic banks (Endah et al., 2015). 2.4 Profitability Profitability shows the Firm's ability to generate profits (Syahyunan, 2015). Health and sustainability of bank profitability are vital in maintaining banking system stability (Idris et al., 2011). Therefore, to improve performance, banks must maximize profits, reduce operational costs, and manage risk. The study of profitability is an important tool in improving performance, evaluating bank
4. operations and determining management plans to help increase the chances of banks surviving in competitive markets . Furthermore, the study of the profitability of Islamic banking is very important as a guide to improving the economy because banks contribute to economic growth and stability (Muda, Shaharuddin, & Embaya, 2013). The level of profitability in this study is measured using financial ratios of return on assets (ROA) because ROA focuses more on the Firm's ability to obtain earnings in the overall operations of the Firm. 2.5 Islamic Corporate Social Responsibility Islamic Corporate Social Responsibility (ICSR) is an Islamic Corporate Social Responsibility concept developed from conventional Corporate Social Responsibility. Related to the need for disclosure of social responsibility in Islamic banking. Some Islamic economics experts began to form a form of reporting on the social performance of sharia business institutions. This is because the CSR reporting of sharia companies uses conventional CSR reporting standards that do not include Islamic principles. Then the index used in the disclosure of CSR is the Islamic Social Reporting (ISR). The Islamic Social Reporting (ISR) index can be grouped into five disclosure themes namely investment and financial themes, products and services, labor, social and environment. The use of this ISR index is intended for reporting social aspects in the activities of Islamic financial institutions in Islamic perspective as an alternative to minimize weaknesses in practice in Islamic financial institutions (Haniffa, 2002). 2.6 Shariah Compliance Islamic banks are banks that carry out their business activities based on sharia principles (Yaya, 2014: 166). Fulfillment of sharia values (sharia compliance) is one of the fundamental aspects that distinguishes conventional Islamic banking (Maradita, 2014: 202). Shariah compliance can be measured quantitatively. In this study shariah compliance is measured by ratios based on sharia principles, namely Islamic income ratio, profit sharing ratio and zakat performance ratio. Islamic income ratio is income derived from activities and investments that are in accordance with sharia principles. Sharia principles prohibit transactions involving usury, gharar, gambling and other illicit matters and require transactions that are halal (Khasanah, 2016). Profit sharing ratio is a ratio that is assessed from the financing made by Islamic banks. Zakat performance ratio issued by Islamic banks comes from net income before it is distributed to shareholders or retained earnings. The distribution of zakat from Islamic banks makes people know how much zakat is distributed. 2.7 Firm Size Firm size is associated with an economies of scale concept. In economic theory, if an industry is the subject of economies of scale, large institutions will be more efficient so that they can produce product services with lower costs, and vice versa. Large banks are assumed to enjoy economies of scale, they are able to produce their outputs or services that are cheaper and more efficient than small banks (Haron, 2004). In general, the greater the size of the bank, the greater the profitability. This is due to the large size of the bank that allows results in economies of scale that will reduce the costs of gathering and processing information (Abduh & Yameen, 2013). This is because large companies that have
5. large resources to conduct broader disclosures and are able to finance the provision of information for internal purposes . This information is also a material for the purposes of disclosure of information to external parties such as investors and creditors so that it does not require a large additional cost to make wider disclosures. Thus, large companies have lower information costs than small companies. 2.8 Sharia Supervisory Board The Sharia Supervisory Board is a body authorized to supervise and closely observe the activities of sharia financial institutions so that the institution always follows the rules and principles of sharia. The Sharia Supervisory Board (SSB) consists of sharia experts who oversee the activities and operations of financial institutions to ensure compliance with sharia principles. SSB is domiciled at the head office and is obliged to directly see the implementation of a sharia financial institution so as not to deviate from the provisions that have been declared by the National Sharia Council (DSN). The DSN is part of the MUI which consists of scholars, practitioners and experts in fields related to the economy and sharia which are tasked with developing the application of Islamic values. 3. CONCEPTUAL FRAMEWORK AND HYPOTHESIS This study measures Islamic corporate social responsibility, shariah compliance, Firm size and Sharia Supervisory Board on profitability in Islamic banks through financial reports and annual reports published to the public. The indicator used in measuring shariah compliance is the Islamic Performance Index consisting of Islamic income ratio, profit sharing ratio and zakat performance ratio (Hameed, et. Al. 2004). The choice of Islamic income ratio, profit sharing ratio and zakat performance ratio was chosen as an indicator to measure sharia compliance because these three indicators can be traced in the financial statements of Islamic banks. Islamic corporate social responsibility and the Sharia Supervisory Board are important for Islamic banks as information tools for stakeholders in the implementation of bank operations. Firm size is a characteristic that is no less important. The larger the size of the Firm the greater the profitability. Based on the description that has been explained, then the research concept is compiled which is a logical relationship from the theoretical foundation and empirical studies which can be described as follows: Islamic Corporate Social Responsibility (X1) Shariah Compliance Islamic Income Ratio (X2) Profit Sharing Ratio (X3) Zakat Performance Ratio (X4) Firm Size (X5) Profitability (Y)
6. Sharia Supervisory Board (X6) Picture 3.1. Conceptual Framework Based on the conceptual framework, the research hypothesis is as follows: H1: Islamic corporate social responsibility has a positive effect on profitability in Islamic Commercial Banks H2: Islamic income ratio has a positive effect on profitability in Islamic Commercial Banks. H3: Profit sharing ratio has a positive effect on profitability in Islamic Commercial Banks. H4: Zakat performance ratio has a positive effect on profitability in Islamic Commercial Banks. H5: Firm size has a positive effect on profitability in Islamic Commercial Banks H6: Sharia Supervisory Board has a positive effect on profitability in Sharia Commercial Banks 4. RESEARCH METHODS The type of research used in this study is associative - causal research. Associative causal research aims to analyze the relationship between one variable with another variable or how an independent variable affects the dependent variable (Sugiyono, 2016) and identify / test the causal relationship between variables (Erlina, 2011). The population in this study is Sharia Commercial Banks in Indonesia from 2011 to 2017. The sampling technique used was saturated samples. The population in this study amounted to 13 Islamic banks with a period of 7 periods so that there were 91 observations. The data analysis method used in this study uses panel data regression analysis using the Eviews application. Descriptive statistics are used to provide a description or description of a data that is seen from the mean, standard deviation, maximum and minimum values (Ghozali, 2013). The classic assumption test is the assumption underlying the regression analysis with the aim of measuring associations or attachments between independent variables. There are four tests related to the classic assumption test, namely the normality test of the data, the multicollinearity test, the heteroscedasticity test and the autocorrelation test. This study uses panel data. Panel data is a combination of time series data (time series) and cross data (cross section) (Widarjono, 2013). There are three models of approaches used to estimate panel data, namely the Common Effect, Fixed Effect, and Random Effect models. There are several tests conducted to be able to estimate panel data, namely the chow test or the likelyhood test, haustman test and lagrange multiplier test. To do hypothesis testing is done by estimating the accuracy test to find out how much the relationship between the independent variable and the dependent variable.
7. Testing the hypothesis in this study using the test coefficient of determination (R2), Simultaneous Significant Test (F-Test) and Partial Significant Test (T-Test). 5. 5.1 RESEARCH RESULTS AND DISCUSSION Research Result Based on data obtained from Firm reports that were used as samples in the study from 2011 to 2017 the descriptive statistics in this study can be shown in Table 5.1 as follows. Table 5.1 Descriptive Statistics Variable Islamic Corporate Social Responsibility (X1) N Min Max Mean Std. Deviation 91 0.00 0.77 0.501 0.201 Islamic Income Ratio (X2) 91 0.00 1.000 0.838 0.279 Profit Sharing Ratio (X3) 91 0.00 0.895 0.253 0.217 Zakat Performance Ratio (X4) 91 0.00 0.059 0.013 Firm Size (X5) Sharia Supervisory Board (X6) 91 91 18.292 1.000 Return On Asset (Y) 91 0.00 0.00 20.1 3 0.008 14.58 4 0.713 12.49 0.407 4.398 4.770 0.256 The classic assumption test in this study is the normality test, multicollinearity test, heteroscedasticity test and autocorrelation test. The normality test of the probability value of the J-B statistic is 0.082933 greater than the significance level, which is 0.05. This means that the assumption of normality is fulfilled. To test the multicollinearity of this study, the symptoms of multicollinearity can be seen from the correlation value between the variables contained in the correlation matrix. The results of the multicollinearity test are presented in Table 5.2. Table 5.2 Multicollinearity Test with the Correlation Matrix X1 X2 X3 X4 X5 X6 X1 1.000000 0.382901 0.379308 0.069965 0.432971 0.508442 X2 0.382901 1.000000 0.287198 0.179516 0.361393 0.417438 X3 0.379308 0.287198 1.000000 0.082528 0.426087 0.374038 X4 0.069965 0.179516 0.082528 1.000000 0.162214 0.179846 X5 0.432971 0.361393 0.426087 0.162214 1.000000 0.439053 X6 0.508442 0.417438 0.374038 0.179846 0.439053 1.000000 Based on Table 5.2 the results of multicollinearity testing, it can be concluded that there are no symptoms of multicollinearity between independent variables. This is because the correlation value between independent variables is not more than 0.9. In this study the presence or absence of heteroscedasticity can be done by the Breusch-Pagan test which is known from the Prob Obs * R-Squared
8. value is 0.1490> 0.05, which means there is no heteroscedasticity. The autocorrelation test in this study is known from the value of the Durbin-Watson statistic, which is 1.622799. This value is located between 1 and 3, which is 1 <1.622799 <3, so the assumption of non-autocorrelation is fulfilled. In other words, there are no symptoms of high residual autocorrelation. Based on the results of the Chow test in this study, the probability value is 0.0318. Because the probability value is 0.0318 <0.05, the estimation model used is the fixed effect model (FEM) model. The next is a hausman test where the probability value is 0.0101. Because the probability value is 0.0101 <0.05, the estimation model used is the fixed effect model (FEM) model. To test the hypothesis of the coefficient of determination, it is known that the coefficient of determination (Adjusted R-squared) of R ^ 2 is 0.433. This value can be interpreted Islamic corporate social responsibility, Islamic income ratio, profit sharing ratio, zakat performance ratio, Firm size and the sharia supervisory board simultaneously or jointly affect profitability by 43.3%, the remaining 56.7% is influenced by others factor. The result of the F test shows the Prob value. (Fstatistics), which is 0.000001 <0.05, it can be concluded that all independent variables, namely Islamic corporate social responsibility, Islamic income ratio, profit sharing ratio, zakat performance ratio, Firm size and the sharia supervisory board simultaneously, significant effect on profitability variables. Based on the t test, the panel data regression equation is obtained as follows.