Effect of Independent Commissioners

Oct 13, 2025 by windailys.com 24 views

The Effect of Independent Commissioners, Islamic Social Reporting, and Sharia Supervisory Board on Profit Management with Company Size as Moderation Variables in Sharia Commercial Banks in Indonesia (2013-2021)

Introduction

In the realm of Islamic banking, profit management is a crucial aspect that requires careful consideration. The presence of independent commissioners, Islamic social reporting, and Sharia Supervisory Board are expected to play a significant role in ensuring that earnings management practices are carried out in accordance with sharia principles. However, the effectiveness of these factors in influencing profit management remains a topic of debate. This study aims to analyze the impact of independent commissioners, Islamic social reporting, and Sharia Supervisory Board on earnings management in Sharia commercial banks in Indonesia, with company size as a moderation variable.

Background

The Islamic banking sector in Indonesia has experienced significant growth in recent years, with the number of Sharia commercial banks increasing from 14 in 2013 to 23 in 2021. However, the sector has also faced challenges related to earnings management, which has led to concerns about the integrity of financial statements. The presence of independent commissioners, Islamic social reporting, and Sharia Supervisory Board are expected to play a crucial role in ensuring that earnings management practices are carried out in accordance with sharia principles.

Methodology

This study employed a quantitative approach, using data from 14 Sharia commercial banks listed in the Financial Services Authority (OJK) in the 2013-2021 period. The data was collected using the purposive sampling method, which involves selecting samples based on certain criteria. The data was then processed using the EViews program version 10 to obtain the right and accurate analysis.

Results

The results of this study showed several important findings:

Effect of Independent Commissioners

Partially, independent commissioners do not have a significant influence on earnings management. This shows that the existence of an independent commissioner has not been able to encourage transparency and accountability in bank financial statements.
However, the results also showed that in a larger bank context, the influence of the independent commissioner can be more pronounced compared to smaller banks.

Islamic Social Reporting

Islamic Social Reporting is proven to have a significant influence on earnings management. This shows that banks that report social activities and responsibilities are more likely to account for their financial performance, so as to reduce the practice of aggressive earnings management.
The results also showed that Islamic social reporting is more effective in larger banks, where the influence of the independent commissioner and the Sharia Supervisory Board can be more pronounced.

Sharia Supervisory Board

The Sharia Supervisory Board also shows a significant effect on earnings management. This indicates that this council plays an important role in ensuring that earnings management is carried out in accordance with sharia principles, which support the integrity of financial statements.
The results also showed that the Sharia Supervisory Board is more effective in larger banks, where the influence of the independent commissioner and Islamic social reporting can be more pronounced.

Moderation Effect of Company Size

The results showed that company size has a moderation effect on the relationship between independent commissioners, Islamic social reporting, and Sharia Supervisory Board and earnings management.
In larger banks, the influence of the independent commissioner and the Sharia Supervisory Board can be more pronounced, while Islamic social reporting is more effective in smaller banks.

Discussion

The results of this study provide valuable insights on how the corporate governance structure in Islamic banks can affect earnings management and the importance of company size considerations in this analysis. The findings suggest that independent commissioners, Islamic social reporting, and Sharia Supervisory Board play a significant role in ensuring that earnings management practices are carried out in accordance with sharia principles. However, the effectiveness of these factors in influencing profit management remains a topic of debate.

Conclusion

This study contributes to the existing literature on earnings management in Islamic banks by providing insights on the impact of independent commissioners, Islamic social reporting, and Sharia Supervisory Board on earnings management. The findings suggest that company size has a moderation effect on the relationship between these factors and earnings management. The results of this study can provide input for banking regulators and practitioners in formulating better policies to improve governance and accountability in the Islamic banking sector in Indonesia.

Recommendations

Based on the findings of this study, the following recommendations are made:

Banking regulators should consider the importance of company size in formulating policies to improve governance and accountability in the Islamic banking sector.
Islamic banks should prioritize the appointment of independent commissioners, Islamic social reporting, and Sharia Supervisory Board to ensure that earnings management practices are carried out in accordance with sharia principles.
The Sharia Supervisory Board should play a more active role in ensuring that earnings management practices are carried out in accordance with sharia principles.
Islamic social reporting should be encouraged in smaller banks to improve transparency and accountability in financial statements.

Limitations

This study has several limitations that should be acknowledged. Firstly, the study only focused on Sharia commercial banks listed in the OJK in the 2013-2021 period. Secondly, the study only used quantitative data, which may not capture the nuances of earnings management practices in Islamic banks. Finally, the study only considered the moderation effect of company size, which may not be the only factor influencing earnings management practices in Islamic banks.

Future Research Directions

This study provides several avenues for future research. Firstly, future studies should consider the impact of other corporate governance structures, such as board composition and audit committee, on earnings management practices in Islamic banks. Secondly, future studies should explore the role of Islamic social reporting in improving transparency and accountability in financial statements. Finally, future studies should consider the impact of company size on earnings management practices in other industries, beyond the Islamic banking sector.
Frequently Asked Questions (FAQs) on the Effect of Independent Commissioners, Islamic Social Reporting, and Sharia Supervisory Board on Profit Management in Sharia Commercial Banks in Indonesia

Q: What is the main objective of this study?

A: The main objective of this study is to analyze the impact of independent commissioners, Islamic social reporting, and Sharia Supervisory Board on earnings management in Sharia commercial banks in Indonesia, with company size as a moderation variable.

Q: What is the significance of this study?

A: This study is significant because it provides insights on how the corporate governance structure in Islamic banks can affect earnings management and the importance of company size considerations in this analysis. The findings of this study can provide input for banking regulators and practitioners in formulating better policies to improve governance and accountability in the Islamic banking sector in Indonesia.

Q: What are the key findings of this study?

A: The key findings of this study are:

Independent commissioners do not have a significant influence on earnings management.
Islamic social reporting is proven to have a significant influence on earnings management.
The Sharia Supervisory Board also shows a significant effect on earnings management.
Company size has a moderation effect on the relationship between independent commissioners, Islamic social reporting, and Sharia Supervisory Board and earnings management.

Q: What are the implications of this study?

A: The implications of this study are:

Banking regulators should consider the importance of company size in formulating policies to improve governance and accountability in the Islamic banking sector.
Islamic banks should prioritize the appointment of independent commissioners, Islamic social reporting, and Sharia Supervisory Board to ensure that earnings management practices are carried out in accordance with sharia principles.
The Sharia Supervisory Board should play a more active role in ensuring that earnings management practices are carried out in accordance with sharia principles.
Islamic social reporting should be encouraged in smaller banks to improve transparency and accountability in financial statements.

Q: What are the limitations of this study?

A: The limitations of this study are:

The study only focused on Sharia commercial banks listed in the OJK in the 2013-2021 period.
The study only used quantitative data, which may not capture the nuances of earnings management practices in Islamic banks.
The study only considered the moderation effect of company size, which may not be the only factor influencing earnings management practices in Islamic banks.

Q: What are the future research directions?

A: The future research directions are:

Future studies should consider the impact of other corporate governance structures, such as board composition and audit committee, on earnings management practices in Islamic banks.
Future studies should explore the role of Islamic social reporting in improving transparency and accountability in financial statements.
Future studies should consider the impact of company size on earnings management practices in other industries, beyond the Islamic banking sector.

Q: What are the practical implications of this study?

A: The practical implications of this study are:

Banking regulators should consider the importance of company size in formulating policies to improve governance and accountability in the Islamic banking sector.
Islamic banks should prioritize the appointment of independent commissioners, Islamic social reporting, and Sharia Supervisory Board to ensure that earnings management practices are carried out in accordance with sharia principles.
The Sharia Supervisory Board should play a more active role in ensuring that earnings management practices are carried out in accordance with sharia principles.
Islamic social reporting should be encouraged in smaller banks to improve transparency and accountability in financial statements.

Q: What are the theoretical implications of this study?

A: The theoretical implications of this study are:

The study provides insights on how the corporate governance structure in Islamic banks can affect earnings management and the importance of company size considerations in this analysis.
The study contributes to the existing literature on earnings management in Islamic banks by providing new insights on the impact of independent commissioners, Islamic social reporting, and Sharia Supervisory Board on earnings management.

Q: What are the policy implications of this study?

A: The policy implications of this study are:

Banking regulators should consider the importance of company size in formulating policies to improve governance and accountability in the Islamic banking sector.
Islamic banks should prioritize the appointment of independent commissioners, Islamic social reporting, and Sharia Supervisory Board to ensure that earnings management practices are carried out in accordance with sharia principles.
The Sharia Supervisory Board should play a more active role in ensuring that earnings management practices are carried out in accordance with sharia principles.
Islamic social reporting should be encouraged in smaller banks to improve transparency and accountability in financial statements.