Governance Mechanisms and CSR Disclosure: The Role of AAOIFI Standards in Enhancing Transparency among Takaful Companies

Authors

  • Fahru Azwa Mohd Zain Faculty of Business and Management Universiti Sultan Zainal Abidin Gong Badak Campus 21300 Kuala Nerus, Terengganu, MALAYSIA.
  • Wan Amalina Wan Abdullah Faculty of Business and Management Universiti Sultan Zainal Abidin Gong Badak Campus 21300 Kuala Nerus, Terengganu, MALAYSIA.
  • Siti Fariha Muhamad Faculty of Entrepreneurship and Business Universiti Malaysia Kelantan Pengkalan Chepa 16100 Kota Bharu, Kelantan, MALAYSIA.
  • Hamdy Abdullah Faculty of Business and Management Universiti Sultan Zainal Abidin Gong Badak Campus 21300 Kuala Nerus, Terengganu, MALAYSIA.
  • Sheikh Ahmad Faiz Sheikh Ahmad Tajuddin Faculty of Business and Management Universiti Sultan Zainal Abidin Gong Badak Campus 21300 Kuala Nerus, Terengganu, MALAYSIA.

Keywords:

AAOIFI standards, governance mechanisms, takaful companies, Voluntary CSR disclosure

Abstract

This study explores the impact of governance mechanisms on the voluntary Corporate Social Responsibility (CSR) disclosure of Takaful companies, with a specific focus on compliance with AAOIFI Governance Standards No.7. Using content analysis of annual reports from Takaful companies in Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions; the research examines how Corporate Governance (CG) and Shari’ah Supervisory Board (SSB) influence the adoption of these standards. The findings reveal that while CG strength significantly enhances voluntary CSR disclosure, the impact of SSB is insignificant. Additionally, political and civil repression negatively correlates with voluntary disclosure, indicating that companies in less-repressed societies are more inclined to provide CSR information. This research underscores the critical role of robust CG in promoting transparency and highlights the influence of societal contexts on disclosure practices. The study contributes to the literature by elucidating the role of AAOIFI standards in enhancing CSR disclosure within the Takaful industry.

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Issue

Vol. 24 (2025): ASIAN JOURNAL OF ACCOUNTING AND GOVERNANCE

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Articles

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