Disclosure Level s Effect of Islamic Social Reporting on Company s Profitability and Zakat

Online Access: www.absronline.org/journals Management and Administrative Sciences Review Volume 6, Issue 2 Pages: 85-98 March, 2017 e-issn: 2308-1368 p-issn: 2310-872X Disclosure Level s Effect of Islamic Social Reporting on Company s Profitability and Zakat Rr. Titiek Herwanti* 1, Muhammad Irwan 2, Nur Fitriyah 3 1. Professor in Economic and Business Faculty, University of Mataram, Indonesia 2. Lecturer in Economic and Business Faculty, University of Mataram, Indonesia 3. Lecturer in Economic and Business Faculty, University of Mataram, Indonesia The purpose of this study was to examine the effect of the Islamic Social Reporting (ISR) disclosure level on profitability and on the number of Zakat paid by the Islamic banking companies in Indonesia. This study used documentary studies with associative research s type. Samples used was purposive sampling method and was selected eight Islamic Banks in Indonesia. The observation period was 2011-2015 with a lag time t+1. Data were analyzed using Partial Least Square (PLS) Program. The data collection derived from secondary data, financial statements and annual reports published by Bank of Indonesia website and the website of each Islamic Banks. The results show that the disclosure level of ISR has a significant and positive effect on profitability represented by Return on Assets ratio (ROA) and Return on Equity ratio (ROE). Furthermore, the profitability of the Islamic Banks has a significant and positive effect on the amount of Zakat paid by the Islamic Banks in Indonesia. This research used only profitability as an independent variable that influenced company performance, in particular ISR disclosure, while several other factors are also predicted have effect on company profitability. Moreover, this research only used profitability variable which is also predicted has influencial on company Zakat, while several other factors also predicted have effect on company Zakat. Keywords: Islamic Social Reporting (ISR), Profitability, Zakat, ROA, ROE, Islamic Banks INTRODUCTION Nowdays, the purpose of company does not only focus on obtaining profitability but also solving social problems happening in its surrounding. If the purposes cannot be carried out by an entity, there will be a potential suffer for both material and immaterial in which in turn it has impact on the going concern of the entity. This is because community is more aware of the social impact as a consequence of an activity carried out by the entity. The responsibility of management that initially on shareholders only shifts to the stakeholders (owners, workers, governance, and community) responsibility. This particular kind of social paradigm shift is deficted from several previous researches. The result of Environic International research showed *Corresponding author: Rr. Titiek Herwanti, Professor in Economic and Business Faculty, University of Mataram, Indonesia. E-Mail: adhitadama@gmail.com 85

that mayority of society in twenty three countries paid highly intention to the social behavior of the company (Gupta, 2003). Besides that, Eipstein and Freedman (1994) in Anggraini (2006) found that the individual investor has high interest on social information in yearly report. Medley (1997) stated that social environment is important to take into consideration when investing or lending loan. Corporate Social Responsibility (CSR) is concerned about not only shareholders interest but also stakeholders t. CSR consists of profit, people, planet, and societal-based norms including Islamicbased Syariah (Syariah is the Islamic rule). It is Islamic-based Syariah in which this research used Islamic Social Reporting Index (ISR), following the significant Syariah development and society interests towards financial institution which is based on syariah principles (Amran, Yusoff, and Zain, 2015). This reflects positive respond and trust of both shareholders and stakeholders who are indicated by company products received, as such impacted by company profitability. Profitability is a base to measure financial performance of company and one of the business attractiveness as well as an important indicator in business competitiveness. The business attractive indicators are usuallu measured by Return on Assets (ROA) and Return on Equity (ROE). Several recent studies (MCGuire et. al., 1998 in Ilmi, 2011, Wardhani, 2007, Satria et al., 2015) showed empirical evidence that ISR disclosure influenced on provitability such as customer loyalty, trust of creditors and investors. This trigger financial company has increased company profitability which is followed by the increase of ROE and ROA of the company in the following years. Several researches about ISR on Syariah banking have been conducted in Indonesia, for instance Wardani (2007), Fitria and Hartanti (2010) who found that generally conventional banking institutions obtain higher score compared to Syariah banking institutions. Besides that, the Islamic banking institution scoring result, with GRI index, is higher than ISR index. Purwitasari s research (2011) in Mandiri Syariah Bank and Muamalat Indonesia Bank explained that the action of reporting social responsibility by BSM and BMI are still affected by their own concerns which are mainly influenced by money and power. However, Sofyani, et al. (2011) found that over all social performance of train-average Islamic banking in Malaysia was a higher score than in Indonesia. Although, of all the banks, none of them which has achieved the best achievement. Satria et al., (2015) showed that the disclosuring level of Islamic Social Reporting (ISR) significantly influenced on company profitability which is reflected by ratio Return on Asset (ROA) and ratio Return on Equity (ROE) on the eight Syariah banks in Indonesia. The above studies, dominantly indicated that many factors influenced disclosuring level while its impact on social disclosure have not yet researched. Therefore, this research is a development of the research conducted by Satria et al., (2015). The development conducted by using time lag between ISR disclosure and respond of financial report users. By assuming that using signalling theory when company bring about ISR disclosure at the end of this year, it will be responded by the information and can be seen in the following year which is reflected in its profitability in the following years. Besides that, this research used one more variable, that is, company Zakat (Zakat is the tithe paid by company, Casson and Napier, 2006 in ISR) as profitability impact obtained by Syariah entity in carrying out its business, in particular profitability as an intervening variable of ISR and zakat. Referring to the assumption that the wider of disclosure carried out, the higher the reputation and trust of stakeholders will be. This is indicated by receiving company products that will be impacted on profitability. Thus, the amount of profitability received would be influenced by the amount of Zakat paid by the company. One of the senses of the use of Zakat is the transformation from maximal net profit achievement to achievement of Zakat. This means that the achievement of profitability is not the ultimate goal of the company instead just an intermediatory goal, while Zakat is the ultimate goal. However, Zakat oriented does not mean that the company ignore profit-oriented from economic perspective. This is because Zakat is taken into account from the profit achieved. Therefore, the performance of the company must be increased to 86

obtain maximal Zakat (Barrak, 1981 in Zaitun, 2001). If the orientation of all company shifts to Zakat oriented, it can be predicted the amount of potensial Zakat that would be managed by the government through Body of National Taking and Sharing Zakat in Indonesia (BAZNAS) is 217 triliun INR, which is now managed by BAZNAS is 2.73 triliun INR or only about one percent. The small number of zakat absorption and management are due to mainly two factors: the low awareness of the importance and benefit of the zakat and the lack of societal trust towards zakat institutions. Therefore, various attempts have been done by BAZNAS in absorpting potential zakat, such as socializing and educating about zakat and its management. Reempowering, resinergizing and reinforcing zakat institution are other attempts that have been executed by BAZNAS to run zakat institution with good governance, transfarancy, and accountability, so that it can be trusted by Islamic society. Besides that, BAZNAS has made serious attempts to increase the acception of zakat from industry sectors due to its great potential. Referring to data from economic ministry, in 2015 zakat resource from households is 20 trilliun INR and from industry is approximately 100 triliun INR (http://www. republika.co.id). Referring to industry sectors as the biggest contributor (more than 80%) of total potential zakat, than the role of the industry in realizing the potential zakat is important. Moreover, paying zakat is an obligatory (constitution no.17/ 2000, income tax article 4 paragraph 3) which states that zakat as a decrease of income tax for parties that is paid zakat. From Islamic religion perspective, the zakat constitution is based on the Qur an, subchapter Al-Baqarah, article no. 26 which mean that Oh ye Muslim believers, spend a part of good results of your attempts ) for the entity labelled syariah including syariah banks. Based on the above background, the purpose of this research is to empirically examine the effect of disclosuring Islamic Social Reporting on profitability and its impact on the number of company Zakat paid by syariah banking companies in Indonesia. LITERATURE REVIEW Conceptual Framework The disclosuring company responsibility is a strategic management to increase reputation and company image. The activity of the CSR would become beneficial as a company strategy, contribute to risk management and maintain the relationship for the long-term company s profitability. In regard to the entity context, CSR activity which is based on Syariah is written down in the ISR index. ISR that is carried out by the company would increase longterm reputation and would improve mutual relation with stakeholders, shareholders, and government s institutions that are reflected in the company s performance. Company s performance can be seen in its probability gained by the company. In this research, ROA and ROE were used as proxy for company s financial performance. The impact of profit gain or benefit in the Islamic context is an obligatory and as the faith manifestation to the Almighty God, as well as the societal care equlity to the human being. This research was carried out to disclosure the effect of the ISR reporting on financial performance and its impact on amount of zakat paid by the company. The research framework is shown in Picture 1. Research Hypothesis The Effect of Disclosure of Islamic Social Reporting on Profitability Legitimacy theory focuses on the interaction between company and community based on social contract (Yoo, Lee, & Lee, 2016), where the company operating and using economic resources. The use of legitimacy theory in this research implied that ISR carried out by company to obtain positive value and legitimacy from community. This ilmplies that when companies obtain legitimacy from community, its will develop sustainably amongst the community to gain maximum profit in the future. FIGURE 1 HERE 87

Good ISR disclosure at syariah banks has wider disclosure level (Basah & Yusuf, 2013). The wider disclosure will spread out positive signal to stakeholders and shareholders. The more information spread out to stakeholders and shareholders, the more information received by them about the company. This will build stakeholders and shareholders trust to the company. Furthermore, the trust will be shown by stakeholders and shareholders by purchasing and consuming company s products which in turn will increase company s profitability (Nugroho & Arjowo, 2014). According to Wardani (2007) Corporate Social Reporting positively affects on ROE and ROA of the company. Satria et al. (2015) found empirical evidence that ISR disclosure carried out by Syariah banks in Indonesia affects on profitability. This showed that the companies implemented CSR/ISR will gain many benefits such as customer loyality and self-trust from creditors and investors. This will trigger out better financial company so that the company profitability will increase and would be followed by the increase of ROE and ROA in the following years. McGuire et al. (1998) in Ilmi (2011) also mentioned that Corporate Social Responsibility activities carried out by company proved that it could increase reputation and as such improved relationship among stakeholders, shareholders and governance which is reflected in the company profit. Finch (2005) stated that the purpose of the company in applying sustainnability reporting framework is to communicate performance management in achieving long-term benefit of the company to the stakeholders such as the financial performance improvement, the increase of competitive advantage, profit maximalization, and company s success in the long term. Thus, the hypotheses are formulated as follows: Hypothesis 1: Disclosuring Islamic Social Reporting effects profitability of Syariah banks in Indonesia, with sub-hypothesis as follows: Hypothesis 1a: Disclosuring Islamic Social Reporting affects ROA Syariah banks in Indonesia Hypothesis 1b: Disclosuring Islamic Social Reporting affects ROE Syariah banks in Indonesia. The Effect of Profitability on Company s Zakat In carry out it s activities, Syariah bank companies are based on Islamic syariah, where consequently, the syariah banks should obey Islamic rules, including the obligatory of paying zakat as one of the Islamic principles for the company that has already fulfilled certainties and requirements. Company zakat means that in operational process, the balance between selfish and altruis is deemly needed (Firmansyah and Rusydiana, 2013). The selfishness can be a trigger to achieve profit, while altruist is a mode of companysocial care towards society and its environment. One of the senses of the use of zakat is the transformation from maximally net profit achievement to zakat oriented. This stresses that the profit achievement is not the ultimate goal of the company instead intermediatory goal. However it does not necessary mean that when the company has zakat oriented then the company will ignore to gain the maximum profit. This is because zakat is counted from the profit obtained. Thus, company performance has to be increased in order to maximize the zakat obtained (Barrak, 1981 in Zaitun (2001). Zaitun s research (2001) showed that profitability which is meausered by ROA and ROE affects on the amount of zakat that must be paid by Bank Muamalat Indonesia. Firmansyah and Rusydiana s research (2013) supported Zaitun s research that profitability measured by ROA was moderated by company size and affect on zakat paid by Bank Umum Syariah in Indonesia. Thus, the hypotheses are formulated as follows: Hypothesis 2: Profitability affects zakat on Syariah bank companies in Indonesia with sub hypothesis as follows: Hypothesis 2a: ROA affects zakat on Syariah bank companies in Indonesia. Hypothesis 2b: ROE affects zakat on Syariah bank companies in Indonesia. 88

RESEARCH METHODOLOGY The population of this research is the Syariah bank companies in Indonesia during the period of 2011-2015. This study used purposive sampling method with criteria: (1) Syariah-based bank in Indonesia; (2) such banks should be established before 2011. Based on the criteria, there were 8 Syariah banks fulfilled it. The eight banks are Bank Syariah Mandiri, Bank Muamalat, BRI Syariah, BNI Syariah, Bank Panin Syariah, Bank Mega Syariah, Bank Syariah Bukopin and BCA Syariah. Variable and Measurement Disclosuring level of Islamic Social Reporting (ISRDI) refers to Accounting and Auditing Organization for Islamic Financial Institution (AAOFI) index. ISRDI is the total of six components: Financial and Investment Index + Product and Services Index + Employee Index + Community Index + Environment Index + Governance of Organization Index. Besides ISRDI, this study also used Return on Asset (ROA) and Return on Equity (ROE) as the profitability measurements. Validity and RealibilityTest Validity test was done using convergent validity. Convergent validity of the measurement model with a reflective indicators can be seen from the correlation between the respective indicator scores with construct scores (Ghozali, 2008). Reflectiive size is considered valid if it is bigger than 0.70. In addition, reliability test was done using composite reliability, where a variable or construct is considered reliable if its composite reliability value is bigger than 0.70 (Werts et al. 1974 in Ghazali, 2008). Hypothesis Testisng Seven steps were applied to test the hypotheses, they are: (1) design structure or inner model; (2) design measurement model (outer model); (3) reconstruct path diagram; (4) reconstruct path diagram to equation; (5) estimate path coefisient and loading value; (6) evaluation of goodness of fit; and (7) hypothesis testing (resampling bootstraping). Hypothesis is acceptable if the t-value statistics is bigger than t- tabel (1,96). Figure 2 shows the research model, as follows: FIGURE 2 HERE RESULT AND DISCUSSION Descriptive Statatistics The results of descriptive statistics are shown in Table 1. Table 1 shows that ISR disclosure conducted by syariah banking was good enough, such as the disclosuring for financial and investment indicator, products and services, society and organizational governance. These are indicated by the average number of disclosuring done by syariah banking was above 50%. Employee and environment indicator in this study are necesary to be increased because the disclosuring average conducted by syariah banking was less than 50%. For profitability, the average ROA can be achieved by syariah banking at approximately 1.13% which was good enough as it is ssuitable for syariah banking standard that is from 0.5 up to 1.25. While, the average score of ROE was 14.87 and zakat of company has the average score of 5.77. This indicates that the average scores of syariah banks have spent company zakat except Syariah Bank Bukopin and BCA Syariah which have not spent their own company zakat yet. The table 1 is as follows: TABLE 1 HERE The Effect of ISR Level on Profitability and it s Impact on Company Zakat Based on the results of Bootstraping, the following figure (Figure 3) is the result of PLS Algoritma calculation: FIGURE 3 HERE 89

Figure 3 shows that six indicators can be classified significantly because based on bootstraping procedure, the good value indicator if the loading factor is bigger than 0.70, but according to Ghozali (2008), loading factor value of 0.5 up to 0.6 is still considered enough. The output result of correlation between indicator and it s construct can be seen in the table 2: TABLE 2 HERE To measure the construct reliability level of the first order and the second order, it is conducted by meauring composite reliability. A variable is reliable if it has composite reliability value bigger than 0.7 (Ghozali, 2008). The composite reliability can be seen in the Table 3 as follows: TABLE 3 HERE Table 3 shows that all constructs have composite reliability value bigger than 0.7. Thus, all constructs are reliable. Furthermore, path coefficients of construcs are shown in the following table (Table 4): TABLE 4 HERE Table 4 shows that all loading factors are significant because its t-statistic value is bigger than 1.96, which ISR to profit is 65.14 and profit to Zakat is 9.89. Thus, it can be concluded that the sixth dimension of Islamic Social Reporting is good enough in explaining company profitability construct. Futhermore, the profitability construct is also good enough in explaining Zakat. This is because the composite reliability is high, so that Islamic Social Reporting is formed by the sixth ISR dimensions. Outer Model Composite Reliability A group of indicator that measures variable has a good composite if it has composite reliability value bigger then (>) 0.5 (Hair et al., 1998 in Ervyana, 2011). The composite reliability is presented in the following table (Table 5): TABLE 5 HERE Table 5 shows that all constructs have composite reliability > 0.5, thus, all of the constructs can are categorized reliable. Convergent Validity Convergent validity from measurement model of reflective indicator is measured based on the correlation between item scores and construct scores which is counted by PLS. Individual refletive measurement is high if it has correlation more than 0.7, although according to Ghozali (2008) loading 0.5 up to 0,6 is considered enough. Output correlation is shown in figure 3. Discriminant Validity FIGURE 3 HERE Discriminant Validity from measurement model of the reflective indicator is measured based on the cross loading measurement. If the construct correlation of the item measurement is bigger than other construct measurement, then it implies that latent constructs predict measurement on their block better than other measurement block (Ghozali,2008). Furthermore, Table 6 below shows that all latent constructs predict indicator on their own block are better than the indicators in other measurement blocks. Inner Model R-Square TABLE 6 HERE In inner model, Goodness of Fit model is measured by using R-square variable laten dependen. R-square is used to see how good it is the value observation resulted by model and its parameter estimation. The following is the R-square value for dependent variables (Table 7). 90

TABLE 7 HERE Table 7 shows that construct variability of company profitability can be explained by the construct of Islamic Social Reporting (ISR) at 0.605014 or 60.5014 %, while 39.4986 % is explained by other variables which are not researched in this study. The other perspective, construct variability of company Zakat can be explained by profitability construct at 0.439002 or 43.9002%, while 56.0998 is explained by other variables which are not analyzed in this study. The second examination is to see the effect of ISR on company profitability by looking at coefisien parameter value and significance t-statistic value. The number of coefficient parameter 0.777827 means that there is a positive and significant effect of ISR on company profitability. Therefore, it can be stated that the higher level of ISR disclosuring, the higher level of syariah banks profitability will be, with t-statistic value at 65.138847 which is bigger than 1.96. Furthermore, the number of coefficient parameter 0.671857 shows that there is a positive and significant effect of company profitability on company zakat. Hence, it can be stated that the higher level of company profitability, the bigger syariah banking company zakat will be, with t statistic value at 9.891025 which is bigger than 1.96. The path coefficient value is shown in Table 8. DISCUSSION TABLE 8 HERE The Effect of ISR Disclosuring Level on Company Profitability Research hypothesis states that disclosuring level of ISR affects company profitability of syariah banks in Indonesia which is reflected by the ratio of Return on Asset (ROA) and ratio of Return on Equity (ROE) are accepted. This result is indicated by t value statistic at 65.14 which is bigger than t table (1.96). Thus, this research empirically proved that disclosuring ISR in yearly report of syariah banks in Indonesia can increase the profitability of the syariah banks. The result of this research supports the Legitimacy theory which focuses on the interaction between company and community and is based on social contaract where the ISR disclosuring carried out by the companies aims to get positive value and legitimacy from the community. This implies that when company obtains legitimacy from community, the company will sustain and develope amongst the community and find out benefit in the future. Besides that, the result of this research also supports Signal theory, in which better and wider ISR disclosure will give positive signal to stakeholders and shareholders. The more information given to stakeholders and shareholders the more information about companies will receive by them, thus they will have more trust to the company. Stakeholders and shareholdres trust can be explored from the increase of products or services sales volume carried out by them that in turn will increase the company s profitability. The results of this study support the previous research results conducted by Wardhani (2007), MC Guire et al. (1998) in Ilmi (2011), Finch (2005), Darwis (2013), and Satria et al. (2015), who found that Corporate Social Responsibility (CSR) or Islamic Social Reporting affected financial performance represented by Return on Asset (ROA) ratio and Return on Equity (ROE) ratio. This implies that companies carried out CSR which can be seen from its Corporate Social Reporting will gain much more profitability such as customers loyalty and trust from creditors and investors. These factors will trigger financial companies becomes better which in turn will increase company profitability indicated by the increase of ROE ratio and ROA ratio in the following year. The Effect of Profitability on Company Zakat Research hypothesis states that the level of company profitability affects the amount of company zakat paid by syariah banks in Indonesia is accepted. This result is indicated by t value statistic at 9.89 which is bigger than t table (1.96). Thus, this research empirically proved that a part from probability gained by syariah banks is spent to pay company zakat as a form of Syariah banks loyalty to the God s (Allah) and the messanger s 91

instruction. The Syariah banks loyalty also supported by the government constitution No. 17/2000 states that Zakat will not encumber company as it is considerd as a decrease of income tax. Paying company zakat has the meaning that in implementing company activities needed the balance between egoistic attitude and altruis/social attitude (Firmansyah and Rusydiana, 2013). Egoistic attitude can be a trigger to gain company s profitability while altruistic attitude is a form of company s care towards community and its environment. Futhermore, transformation from achieving maximally net profit to zakat oriented implies that profitability is only an intermediatory goal, not a ultimate goal. This is because zakat is taken from profitability gained by the company, thus company s performance must be increased so that zakat can be maximally gained (Barract, 1981 in Zaitun, 2001). The result of this research supports the result of the previous researches, for example research by Zaitun (2001) found that profitability represented by ROA ratio and ROE ratio affected the amount of zakat paid by Indonesia Muamalat Bank. Research by Firmansyah and Rusydiana (2013) also found that the company profitability affected Zakat spent by Syariah Public Banks in Indonesia trough company size as the moderation variable. CONCLUSION, RECOMMENDATION AND LIMITATION Disclosuring level of Islamic Social Reporting (ISR) affected company profitability represented by Return on Asset (ROA) ratio and Return on Equity (ROE) ratio. This stresses that the bigger and the wider ISR disclosure to the stakeholders and shareholders the higher ROA ratio and ROE ratio will be. The result also shows that the profitability level affected the amount of company zakat paid by the Syariah bank companies in Indonesia. This stresses that the higher level of the provitability ratio, the higher amount of Zakat paid by the Syariah banks in Indonesia. This study has limitations as it only used profitability as an independent variable that affects company performance, in particular ISR disclosure. While, several other predicted factors also affect company profitability. This is proved by R2 value which is only 60.5014%, which means that the rest of 39.4986% explained by other variables that did not carry out in this research. Furthermore, this research only used profitability variable which was predicted has effect on company Zakat. While, several other factors are also predicted have effect on company Zakat. This is proved by R2 value which is only 43.9002%, which means the rest 56.0998% was explained by other variables but was not analyzed in this research. Finally, the study only used eight Syariah banks in Indonesia as samples, hence the finding cannot be generelized for all Syariah banks in Indonesia. In order to get comprehensive finding, next researches may add other variables that might be influential on company probability such as inflation level, interest rate, liquidity ratio, Capital Adequacy Ratio (CAR), and Non Performance Loan (NFL). In addition, next researches may also add other variables that might be influential on company zakat such as zakat payment system, size of directors board, Syariah supervisory board, Audit committee, leverage level and companies size. Moreover, next research may compare social responsibility disclosure which is based on Global Reporting Initiative (GRI) index with Islamic Social Reporting based on the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Finally, the amount of samples used in the next research may cover wider environments in syariah field, and it is not only limited on Syariah public banks, but also cover other syariah business unit in Indonesia. REFERENCES Amran, A., Darus, F., Yusoff, H., and Zain, M.M. (2015). Islamic Social Reporting: Perspective of Makasid Al Shariah. Journal of Islamic Economics, Banking and Finance, Vol. 11, No.1, 93-121. http://ibtra.com/pdf/journal/v11_n1_ article5.pdf. Anggraini, Fr. RR. (2006) Social Information Disclosure and It s Influence Factors in Annually Financial Report (Emperical 92

Study in Companies Listed in Jakarta Stock Exchange), Proceedings of the 9 th Accounting National Symposium. Padang, Indonesia. Basah, M.Y.A., and Yusuf, M. M. (2013). Islamic Bank and Corporate Social Responsibility (CSR). European Journal of Business and Management (EJBM)-Special Issue: Islamica Management Business, Vol. 5, No. 11, 1904-209. http://iiste.org/ Journals/ index.php/ejbm/article/ download/ 5441/5554 Darwis, Kurnia. (2013). The Effect of CSR Disclosure on Financial Performance in Banking Industry Listed in Jakarta Stock Exchange, Phd. Thesis University of Hasanuddin, Makassar, Indonesia. Finch, Nigel. (2005). The Motivations for Adopting Sustainability Disclosure. Macquarie Graduate School of Management Working Paper (MGSM WP), (17), 1-19. file:///c:/users/user/downloads/ssrnid798724%20(1).pdf Firmansyah, Irman and A.S. Rusydiana. (2013). The Effect of Profitability on Zakat Spending in Sharia Public Banks in Indonesia, Company Size as Moderating Variable. Journal of Liquidity, Vol. 2 (2). Fitria, Soraya and Hartanti, Dwi. (2010). Islam and Its Social Responsibiltiy: Disclosure Comparative Study Based on Global Reporting Initiative (GRI) Index and Islamic Social Reporting Index. Proceedings of the 13 th Accounting National Symposium. Purwokerto, Indonesia. Ghozali, Imam. (2008). Structural Equation Modeling, Alternative Method Using Partial least square (PLS). Semarang, Indonesia: Badan Penerbit University of Diponegoro. Gupta, Ashok. 2003. Why Should Companies Care? Mid-American Journal of Business. Spring pg. 3 Ilmi, Bahrul M. (2011). The Effect of Zakat as CSR Towards Company Performance In Sharia Banks in Indonesia. Jurnal Bisnis dan Ekonomi, Vol. 26. November Edition, 2011. ISSN 2088-6594. Medley, Patrick. (1997). Environmental Accounting What Does It Mean to Professional Accountants? Journal of Accounting Auditing & Accountability. Vol.10 No.4, 594-600. doi/full/10.1108/09513579710180833. Nugroho, P. I., & Arjowo, I. S. (2014). The Effect of Sustainability Report Disclosure Towards Financial Performance. International Journal of Business and Management Studies, Vol. 03, No. 03, 225-239. http://university publications.net/ijbms/0303/pdf/r4me44.p df Purwitasari, Fadilla. (2011). The Report Analysis of Sharia Banking CSR in Sharia Enterprise Theory Perspective (Case Study in Annually Report of Bank Sharia Mandiri and Bank Muamalat Indonesia. Master Dissertation, University of Diponegoro, Semarang. Satria, Beni, Lilik Handajani, and Fitriyah, Nur. (2015). The Level of Islamic Social Reporting Disclosure in Sharia Banks in Indonesia and It s Impact on Company Profitability. Accounting Regional Conference II, 29-30 April 2015. University of Kanjuruhan, Malang, Indonesia. Sofyani, Hafiez Ihlyaul Ulum, et al. (2011). Islamic Social Reporting Index as Measurement Model on Social Performance of Sharia Banking. Jurnal Dinamika Akuntansi, Vol.4, No.1. ISSN 2085-4277. Wardhani, Ambar R. (2007). The Impact of Corporate Social Reporting on Company s Financial Performance. Master Dissertation, University of Indonesia, Jakarta. 93

Yoo, J., Lee, M. K., & Lee, W. S. (2016). Asymmetrical corporate responses to economic information: Applying the firm size effect. Journal of Administrative and Business Studies, 2(1): 35-47. http://www.tafpublications.com/platform/a rticles/full-jabs 2.1.4. php. Zaitun, Sri., 2001. The Effect Analaysis of Profitability Ratio on Zakat in Bank Muamalat Indonesia, Ph.D Thesis, University of Diponegoro, Semarang. Zakat resource from households and from industries (http://www. republika.co.id). 94

APPENDIX Table 1: Results of Descriptive Statistic Indicators N Minimum Maximum Mean Std. Deviation FII 40 0.33 0.83 0.5763 0.13258 PSI 40 0.00 1.00 0.5500 0.39305 EI 40 0.10 0.90 0.3450 0.29953 CI 40 0.09 1.00 0.5737 0.29886 EnI 40 0.00 0.71 0.2243 0.30340 OGI 40 0.40 0.80 0.6800 0.11810 ROA 40-2.53 3.81 1.1269 1.01493 ROE 40-4.71 68.09 14.8755 18.97034 ZAC 40 0.00 10.45 5.7645 4.78058 VALID N (Listwise) 40 Source: Secondary data was processed (2015) Table 2: Outer Weights (Mean, STDEV, T-Values) Construct Original Sample (O) Sample Mean (M) Standard Deviation (STDEV) Standard Error (STERR) T Statistics (IO/STERR) E ISR 0.172700 0.174519 0.002954 0.002954 58.458.878 FI ISR 0.190252 0.188461 0.003056 0.003056 62.263.195 En ISR 0.155256 0.157531 0.003513 0.003513 44.189.137 Zakat ZAC 1.000.000 1.000.000 0.000000 C ISR 0.224730 0.224144 0.002869 0.002869 78.336.865 PS ISR 0.220909 0.219500 0.003302 0.003302 66.904.078 ROA Profit 0.472418 0.470878 0.006455 0.006455 73.185.146 ROE Profit 0.603462 0.604749 0.006116 0.006116 98.672.654 OG ISR 0.214643 0.212512 0.004121 0.004121 52.082.876 Source: Secondary data was processed (2015) Table 3: Composite Reliability Construct Composite Reliability Remark ISR 0.941366 RELIABLE PROFIT 0.924792 RELIABLE COMPANY ZAKAT 1.000000 RELIABLE Soure: Secondary data was processed (2015) 95

Constructs Table 4: Path Coefficients (Mean, STDEV, T-Values) Original Sample (O) Sample Mean (M) Standard Deviation (STDEV) Standard Error (STERR) T Statistics ( O/STERR) ISR -> PROFIT 0.777827 0.779889 0.011941 0.011941 65.138847 PROFIT -> ZAKAT COMPANY 0.671857 0.715532 0.067926 0.067926 9.891025 Source: Secondary Data was Processed (2015) Table 5: Composite reliability Construct Composite Reliability Remark ISR 0.941366 RELIABLE PROFIT 0.924792 RELIABLE ZAKAT COMPANY 1.000000 RELIABLE Source: Secondary data was processed (2015) Table 6: Cross Loadings CONSTRUCT ISR PROFIT COMPANY ZAKAT EI 0.915861 0.570401 0.505879 FII 0.753238 0.628375 0.603454 EnI 0.904899 0.512787 0.557094 CI 0.918645 0.742249 0.627110 PSI 0.866283 0.729631 0.790133 OGI 0.746441 0.708934 0.400392 ROA 0.583193 0.909165 0.582742 ROE 0.832390 0.945368 0.641754 LOG ZAKAT 0.690085 0.662572 1.000000 Source: Secondary data was Processed (2015) Table 7: R Square Construct R Square ISR PROFIT 0.605014 COMPANY ZAKAT 0.439002 Souce: Secondary data was processed (2015) Table 8: Path Coefficients (Mean, STDEV, T-Values) Construct Original Sample (O) Sample Mean (M) Standard Deviation (STDEV) Standard Error (STERR) T Statistics (O/STERR) ISR -> PROFIT 0.777827 0.779889 0.011941 0.011941 65.138847 PROFIT -> COMPANY ZAKAT 0.671857 0.715532 0.067926 0.067926 9.891025 Souce: Secondary data was processed (2015) 96

Figure 1: Research Conceptual Framework FII PSI ROA EI CI ISR Profit Zakat ZAC EnI OGI ROE Note: Figure 2: Research Model FII Financial and Investment Index OGI Organizational Governance Index PSI Product and Service Index ISR Islamic Social Reporting EI Employee Index ROA Return on Asset CI Community Index ROE Return on Equity EnI Environment Index ZAC Zakat Amount of the Company 97

FII PSI 0.763 EI CI EnI 0.866 0.916 0.919 0.908 0.746 ISR 0.000 0.778 Profit 0.605 0.909 0.945 0.663 ROA ROE Zakat 0.439 1.000 ZAC OGI Figure 3: Result of PLS Algoritm Calculation 98