Value creation for Shariah-compliant companies from the perspective of Maqasid Shariah: A proposed framework
DOI:
https://doi.org/10.24200/jonus.vol8iss3pp87-108Abstract
Integrated reporting (IR) conveys the integrated thinking (IT) process for creating value for organisations. Drawing from the framework of Maqasid Shariah, the paper seeks to propose a framework for measuring value creation for Shariah-compliant Companies (ShCCs). Based on the existing literature on the performance of companies, this paper explores the measurements of value creation, which is arguably the consequence of integrated reporting and integrated thinking in an organization that matches the framework of Maqasid Shariah. This issue is examined by looking at the context of ShCCs in Malaysia. The findings support the contention by Shariah Enterprise Theory, which is the extension of legitimacy and stakeholders’ theory. The various measurements of value creation can be classified under the broad classification of Abu Zahrah's (1997) Maqasid Shariah framework. This paper enhances the understanding of value creation from the perspective of Islam, thereby contributing to meeting the initial aim of the ShCC classification, which is to fulfil the needs of Muslim stakeholders. Additionally, the proposed framework provides measurements of value creation based on the Maqasid Shariah framework that can be used in future research.
Keywords: Maqasid Shariah, value creation, integrated reporting, integrated thinking, Shariah-compliant companies.
References
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Chang, S., & Jo, H. (2019). Employee-friendly practices, product market competition, and firm value. Journal of Business Finance and Accounting, 46(1–2), 200–224.
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Knauer, A., & Serafeim, G. (2014). Attracting long-term investors through integrated thinking and reporting: A clinical study of a biopharmaceutical company. Journal of Applied Corporate Finance, 26(2), 57–64.
Lee, K. W., & Yeo, G. H. H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47(4), 1221–1250.
Mähönen, J. (2020). Integrated reporting and sustainable corporate governance from European perspective. Accounting, Economics and Law: A Convivium, 10(2), 20180048.
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Mohammed, M. O., & Taib, F. M. (2015). Developing Islamic banking performance measures based on Maqasid al-Shari’ah framework: Cases of 24 selected banks. Journal of Islamic Monetary Economics and Finance, 1(1), 55–77.
Mohammed, N. F., Mohd Fahmi, F., & Ahmad, A. E. (2019). The need for Islamic accounting standards: The Malaysian Islamic financial institutions experience. Journal of Islamic Accounting and Business Research, 10(1), 115–133.
Moolman, J., Oberholzer, M., & Steyn, M. (2019). The effect of integrated reporting on integrated thinking between risk, opportunity and strategy and the disclosure of risks and opportunities. Southern African Business Review, 20(1), 600–627.
Moran, P., & Ghoshal, S. (1999). Markets, firms, and the process of economic development. Academy of Management Review, 24(3), 390–412.
Muratov, M. (2019). Integrated reporting from an Islamic perspective: Analysis of selected Islamic banks. (Unpublished master dissertation). College of Islamic Studies, Hamad Bin Khalifa University.
Nugraha, E., Nugroho, L., Lindra, C., & Sukiati, W. (2020). Maqashid Sharia implementation in Indonesia and Bahrain. Etikonomi, 19(1), 155–168.
Nugraheni, P. (2018). Sharia supervisory board and social performance of Indonesian Islamic banks. Jurnal Akuntansi Dan Auditing Indonesia, 22(2), 137-147.
Nugroho, L., Husnadi, T. C., Utami, W., & Hidayah, N. (2017). Maslahah and strategy to establish a single state-owned Islamic bank in Indonesia. Tazkia Islamic Finance and Business Review, 10(1), 17–33.
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Institut Islam Hadhari, Universiti Kebangsaan Malaysia.
Purdy, D. E. (1983). The enterprise theory: An extension. Journal of Business Finance & Accounting, 10(1), 521–541.
Ramezani, C. A., Soenen, L. A., & Jung, A. R. (2005). Growth, corporate profitability, and shareholder value creation. SSRN.
Ramli, N. M., Ali, N. S. A. M., & Muhammed, N. A. (2018). Integrated reporting based on Maqasid Al-Shariah: A proposed framework for Islamic non-profit organizations. Advances in Economics, Business and Management Research, 57(November),
63–72.
Roman, A. G., Mocanu, M., & Hoinaru, R. (2019). Disclosure style and its determinants in integrated reports. Sustainability (Switzerland), 11(7), 1–17.
Said, R., Abd Samad, K., Mohd Sidek, N. Z., Ilias, N. F., & Omar, N. (2018). Corporate social responsibility disclosure index of Malaysian Shariah–compliant companies. International Journal of Ethics and Systems, 34(1), 55–69.
Sajid, M., & Afza, T. (2018). Does managerial behavior of managing earnings mitigate the relationship between corporate governance and firm value? Evidence from an emerging market does managerial behavior of managing earnings mitigate the
relationship between corporate governance and. Future Business Journal, 4(1), 139–156.
Salvi, A., Vitolla, F., Giakoumelou, A., Raimo, N., & Rubino, M. (2020). Intellectual capital disclosure in integrated reports: The effect on firm value. Technological Forecasting and Social Change, 160(C), 1-8.
Senne, L. (2017). The value creation of integrated reporting: A stakeholder perspective and organisational performance. (Unpublished doctoral dissertation). University of Pretoria.
Serafeim, G. (2015). Integrated reporting and investor clientele. Journal of Applied Corporate Finance, 27(1), 34–51.
Sudarma, M., Triyuwono, I., Ludigdo, U., & Meutia, I. (2010). Qualitative approach to build the concept of social responsibility disclosures based on Shari’ah enterprise theory. SSRN.
Tarique, K. M., Islam, R., & Mohammed, M. O. (2021). Developing and validating the components of Maqasid al- Shari’ah – Based performance measurement model for Islamic banks. International Journal of Islamic and Middle Eastern Finance and
Management, 14(2), 366–390.
Tripathi, M., Kashiramka, S., & Jain, P. K. (2019). Has EVA evolved to outperform conventional earnings measures in determining firm’s value? A case of Indian consumer firms. Asia-Pacific Journal of Accounting & Economics, 00(00), 1–15.
Villiers, C. de, Rinaldi, L., & Unerman, J. (2014). Integrated reporting: Insights, gaps and an agenda for future research. Accounting, Auditing and Accountability Journal, 27(7), 1042–1067.
Villiers, C. de., & Dimes, R. (2020). How management control systems enable and constrain integrated thinking. Meditari Accountancy Research, 29(4), 851-872.
Villiers, C. de., Venter, E. R., & Hsiao, P. K. (2016). Integrated reporting: Background, measurement issues, approaches and an agenda for future research. Accounting and Finance, 57(4), 937–959.
Wardani, M. K., & Sari, D. D. (2018). Disclosure of Islamic social reporting in Sharia banks: Case of Indonesia and Malaysia. Journal of Finance and Islamic Banking, 1(2), 105–120.
Abu Zahrah, M. (1997). Usul al-Fiqh. Dar al-Fikr al-Arabi.
Adams, C. (2017). Understanding integrated reporting. Routledge.
Adnan, M. A., & Gaffikin, M. (1997). The Shari’ah, Islamic banks and accounting concepts and practices. In Accounting, Commerce and Finance: The Islamic Perspective International Conference. University of Western Sydney.
Al-Htaybat, K., & Alberti-Altayebat, L. von. (2018). Integrated thinking leading to integrated reporting: Case study insights from a global player. Accounting, Auditing and Accountability Journal, 31(5), 1435–1460.
Al-Shammari, B. (2013). An investigation of voluntary disclosure by Kuwaiti Shariah-compliant companies. Journal of Economic and Administrative Sciences, 29(1), 21-41.
Azis, N. K., Marzuki, M. M., & Majid, W. Z. N. A. (2020). Fraud prevention in Malaysia : Maqasid al-Shariah perspective. Global Business and Management Research: An International Journal, 12(2), 104–117.
Camilleri, M. A. (2018). Theoretical insights on integrated reporting: The inclusion of non-financial capitals in corporate disclosures. Corporate Communications: An International Journal, 23(4), 567-581.
Chang, S., & Jo, H. (2019). Employee-friendly practices, product market competition, and firm value. Journal of Business Finance and Accounting, 46(1–2), 200–224.
Chapra, M. U. (2000). The future of economics: An Islamic perspective. The Islamic Foundation.
Cheikh, I. B., & Noubbigh, H. (2019). The effect of intellectual capital drivers on performance and value creation: The case of Tunisian non-financial listed companies. Journal of the Knowledge Economy, 10(1), 147–167.
Darus, F., Mad, S., Nejati, M., & Yusoff, R. (2016). When quality matters! CSR disclosure and value creation. International Journal of Economics and Management, 10(S2), 285–302.
Dilling, P. F. A., & Caykoylu, S. (2019). Determinants of companies that disclose high-quality integrated reports. Sustainability (Switzerland), 11(13), 1-31.
Dumay, J., La Torre, M., Bernardi, C., & Guthrie, J. (2019). Integrated reporting and integrated thinking: Practical challenges. In S. Arvidsson (Eds.), Challenges in managing sustainable business (pp. 25-54). Palgrave Macmillan.
El-deeb, M. S., & Megeid, N. S. A. (2015). Impact of earnings management on investor’s sensitivity using shareholder impact of earnings management on investor’s sensitivity using shareholder value creation. Dar Almandumah.
Falson, J. (2019). Analytic hierarchy process: An empirical valuation for intangible assets. Journal of the Malaysian Institute of Planners, 17(1), 240–249.
Farokhi, S., Roghanian, E., & Samimi, Y. (2020). Quantitative target setting in balanced scorecard method using simultaneous equations system and goal programming. International Journal of Productivity and Performance Management, 69(9),
2089–2118.
Feng, T., Cummings, L., & Tweedie, D. (2017). Exploring integrated thinking in integrated reporting – An exploratory study in Australia. Journal of Intellectual Capital, 18(2), 330–353.
Hall, J. H. (2013). Toward improved use of value creation measures in financial decision-making. The Journal of Applied Business Research, 29(4), 1175–1188.
Hall, J. H. (2018). Value creation measures: An industry-based study. International Journal of Productivity and Performance Management, 67(2), 426–444.
Haniffa, R., Hudaib, M., & Mirza, A. M. (2002). Accounting policy choice within the Shari’Ah Islami’Iah framework. (Unpublished Paper Number 02/04). Department of Accounting & MIS, King Fahd University of Petroleum & Minerals.
Haniffa, R., & Hudaib, M. (2007). Exploring the ethical identity of Islamic banks via communication in annual reports. Journal of Business Ethics, 76(1), 97–116.
Hasan, Z., & Asutay, M. (2017). Maslahah in stakeholder management for Islamic financial institutions. Islamic Quarterly, 61(4), 505–537.
Hooy, C. W., & Ali, R. (2017). Does a Muslim CEO matter in Shariah-compliant companies? Evidence from Malaysia. Pacific Basin Finance Journal, 42(1), 126–141.
Humphery-Jenner, M., & Powell, R. (2014). Firm size, sovereign governance, and value creation: Evidence from the acquirer size effect. Journal of Corporate Finance, 26(1), 57–77.
Ibrahim, S. H. M. (2000). The need for Islamic accounting: Perceptions of its objectives and characteristics of Islamic accounting: Perceptions of Malaysian Muslim accountants and accounting academics. (Unpublished doctoral dissertation).
University of Dundee.
IIRC. (2013). The international IR framework. International Integrated Reporting Council.
IIRC. (2021). The international IR framework. International Integrated Reporting Council.
Kalafut, P. C., & Low, J. (2001). The value creation index: Quantifying intangible value. Strategy & Leadership, 29(5), 9–15.
Kamali, M. (1999). Maqasid Al-Shari’ah: The objectives of Islamic law. Islamic Studies, 38(2), 193–208.
Kaya, C. T., Erguden, A. E., & Sayar, A. Z. (2016). Essence of integrated reporting: A holistic framework for sustainability and value creation. International Journal of Academic Research in Accounting, Finance and Management Sciences, 6(1), 29–34.
Knauer, A., & Serafeim, G. (2014). Attracting long-term investors through integrated thinking and reporting: A clinical study of a biopharmaceutical company. Journal of Applied Corporate Finance, 26(2), 57–64.
Lee, K. W., & Yeo, G. H. H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47(4), 1221–1250.
Mähönen, J. (2020). Integrated reporting and sustainable corporate governance from European perspective. Accounting, Economics and Law: A Convivium, 10(2), 20180048.
Malik, B. A. (2016). Philanthropy in practice: Role of zakat in the realization of justice and economic growth. International Journal of Zakat, 1(1), 64–77.
McGuigan, N., Haustein, E., Kern, T., & Lorson, P. (2020). Thinking through the integration of corporate reporting: Exploring the interplay between integrative and integrated thinking. Meditari Accountancy Research, 29(4), 775-804.
Mergaliyev, A., Asutay, M., Avdukic, A., & Karbhari, Y. (2019). Higher ethical objective (Maqasid al‑Shari’ah) augmented framework for Islamic banks: Assessing ethical performance and exploring its determinants. Springer.
Mohammed, M. O., & Taib, F. M. (2015). Developing Islamic banking performance measures based on Maqasid al-Shari’ah framework: Cases of 24 selected banks. Journal of Islamic Monetary Economics and Finance, 1(1), 55–77.
Mohammed, N. F., Mohd Fahmi, F., & Ahmad, A. E. (2019). The need for Islamic accounting standards: The Malaysian Islamic financial institutions experience. Journal of Islamic Accounting and Business Research, 10(1), 115–133.
Moolman, J., Oberholzer, M., & Steyn, M. (2019). The effect of integrated reporting on integrated thinking between risk, opportunity and strategy and the disclosure of risks and opportunities. Southern African Business Review, 20(1), 600–627.
Moran, P., & Ghoshal, S. (1999). Markets, firms, and the process of economic development. Academy of Management Review, 24(3), 390–412.
Muratov, M. (2019). Integrated reporting from an Islamic perspective: Analysis of selected Islamic banks. (Unpublished master dissertation). College of Islamic Studies, Hamad Bin Khalifa University.
Nugraha, E., Nugroho, L., Lindra, C., & Sukiati, W. (2020). Maqashid Sharia implementation in Indonesia and Bahrain. Etikonomi, 19(1), 155–168.
Nugraheni, P. (2018). Sharia supervisory board and social performance of Indonesian Islamic banks. Jurnal Akuntansi Dan Auditing Indonesia, 22(2), 137-147.
Nugroho, L., Husnadi, T. C., Utami, W., & Hidayah, N. (2017). Maslahah and strategy to establish a single state-owned Islamic bank in Indonesia. Tazkia Islamic Finance and Business Review, 10(1), 17–33.
Osman, A. Z. (2010). Accountability of waqf management: Insight frompraxis of nongovernmental organisation (NGO). In The 7th International Conference on the Tawhidi Epistemology: Zakat and Waqf Economy, 6th-7th January (pp. 153-176).
Institut Islam Hadhari, Universiti Kebangsaan Malaysia.
Purdy, D. E. (1983). The enterprise theory: An extension. Journal of Business Finance & Accounting, 10(1), 521–541.
Ramezani, C. A., Soenen, L. A., & Jung, A. R. (2005). Growth, corporate profitability, and shareholder value creation. SSRN.
Ramli, N. M., Ali, N. S. A. M., & Muhammed, N. A. (2018). Integrated reporting based on Maqasid Al-Shariah: A proposed framework for Islamic non-profit organizations. Advances in Economics, Business and Management Research, 57(November),
63–72.
Roman, A. G., Mocanu, M., & Hoinaru, R. (2019). Disclosure style and its determinants in integrated reports. Sustainability (Switzerland), 11(7), 1–17.
Said, R., Abd Samad, K., Mohd Sidek, N. Z., Ilias, N. F., & Omar, N. (2018). Corporate social responsibility disclosure index of Malaysian Shariah–compliant companies. International Journal of Ethics and Systems, 34(1), 55–69.
Sajid, M., & Afza, T. (2018). Does managerial behavior of managing earnings mitigate the relationship between corporate governance and firm value? Evidence from an emerging market does managerial behavior of managing earnings mitigate the
relationship between corporate governance and. Future Business Journal, 4(1), 139–156.
Salvi, A., Vitolla, F., Giakoumelou, A., Raimo, N., & Rubino, M. (2020). Intellectual capital disclosure in integrated reports: The effect on firm value. Technological Forecasting and Social Change, 160(C), 1-8.
Senne, L. (2017). The value creation of integrated reporting: A stakeholder perspective and organisational performance. (Unpublished doctoral dissertation). University of Pretoria.
Serafeim, G. (2015). Integrated reporting and investor clientele. Journal of Applied Corporate Finance, 27(1), 34–51.
Sudarma, M., Triyuwono, I., Ludigdo, U., & Meutia, I. (2010). Qualitative approach to build the concept of social responsibility disclosures based on Shari’ah enterprise theory. SSRN.
Tarique, K. M., Islam, R., & Mohammed, M. O. (2021). Developing and validating the components of Maqasid al- Shari’ah – Based performance measurement model for Islamic banks. International Journal of Islamic and Middle Eastern Finance and
Management, 14(2), 366–390.
Tripathi, M., Kashiramka, S., & Jain, P. K. (2019). Has EVA evolved to outperform conventional earnings measures in determining firm’s value? A case of Indian consumer firms. Asia-Pacific Journal of Accounting & Economics, 00(00), 1–15.
Villiers, C. de, Rinaldi, L., & Unerman, J. (2014). Integrated reporting: Insights, gaps and an agenda for future research. Accounting, Auditing and Accountability Journal, 27(7), 1042–1067.
Villiers, C. de., & Dimes, R. (2020). How management control systems enable and constrain integrated thinking. Meditari Accountancy Research, 29(4), 851-872.
Villiers, C. de., Venter, E. R., & Hsiao, P. K. (2016). Integrated reporting: Background, measurement issues, approaches and an agenda for future research. Accounting and Finance, 57(4), 937–959.
Wardani, M. K., & Sari, D. D. (2018). Disclosure of Islamic social reporting in Sharia banks: Case of Indonesia and Malaysia. Journal of Finance and Islamic Banking, 1(2), 105–120.
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2023-09-30
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Value creation for Shariah-compliant companies from the perspective of Maqasid Shariah: A proposed framework. (2023). Journal of Nusantara Studies (JONUS), 8(3), 87-108. https://doi.org/10.24200/jonus.vol8iss3pp87-108
