Sustainability Reporting Disclosure in Islamic Corporates: Do Human Governance, Corporate Governance, and IT Usage Matter?

Round 1

Reviewer 1 Report

Acceptable for publication

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Reviewer 2 Report

The paper is very interesting but has some important limitations related to the theoretical anchorage. In fact, the authors do not delve into the theories adequately. In this regard, I suggest some papers to consider for the presentation of stakeholder theory and agency theory:

"Vitolla, F., Raimo, N., Rubino, M., & Garzoni, A. (2019). The impact of
national culture on integrated reporting quality. A stakeholder theory
approach. Business Strategy and the Environment, 28 (8), 1558-1571.

Donnelly, R., & Mulcahy, M. (2008). Board structure, ownership, and
voluntary disclosure in Ireland. Corporate Governance: An International
Review, 16 (5), 416-429.

Barako, D. G., & Brown, A. M. (2008). Corporate social reporting and
board representation: evidence from the Kenyan banking sector. Journal
of Management & Governance, 12 (4), 309-324.

Frias - Aceituno, J. V., Rodriguez - Ariza, L., & Garcia - Sanchez, I.
M. (2013). The role of the board in the dissemination of integrated
corporate social reporting. Corporate social responsibility and
environmental management, 20 (4), 219-233.

Vitolla, F., Raimo, N., & Rubino, M. (2020). Board characteristics and
integrated reporting quality: an agency theory perspective. Corporate
Social Responsibility and Environmental Management, 27 (2), 1152-1163. " 

The theories used should also be used for the discussion of the results. Furthermore, the authors should extend the conclusions which, at present, turn out to be too synthetic.

Good luck to the authors.

Author Response

Dear Reviewer,

We would like to thank you for the review, and the opportunity to resubmit a revised copy of this manuscript. We would also like to take this opportunity to express our appreciation to you for the positive feedback and helpful comments for correction or modification. We believe that we have resulted in an improved revised manuscript, which you will find uploaded alongside this document. The manuscript has been revised to address the reviewer comments, which are appended alongside our responses to this letter. We very much hope the revised manuscript is accepted for publication in the Journal. Thank you so much for your help and consideration. We really appreciate it.

Comment from Reviewer 2

The paper is very interesting but has some important limitations related to the theoretical anchorage. In fact, the authors do not delve into the theories adequately. In this regard, I suggest some papers to consider for the presentation of stakeholder theory and agency theory:

"Vitolla, F., Raimo, N., Rubino, M., & Garzoni, A. (2019). The impact of
national culture on integrated reporting quality. A stakeholder theory
approach. Business Strategy and the Environment, 28 (8), 1558-1571.

Donnelly, R., & Mulcahy, M. (2008). Board structure, ownership, and
voluntary disclosure in Ireland. Corporate Governance: An International
Review, 16 (5), 416-429.

Barako, D. G., & Brown, A. M. (2008). Corporate social reporting and
board representation: evidence from the Kenyan banking sector. Journal
of Management & Governance, 12 (4), 309-324.

Frias - Aceituno, J. V., Rodriguez - Ariza, L., & Garcia - Sanchez, I.
M. (2013). The role of the board in the dissemination of integrated
corporate social reporting. Corporate social responsibility and
environmental management, 20 (4), 219-233.

Vitolla, F., Raimo, N., & Rubino, M. (2020). Board characteristics and
integrated reporting quality: an agency theory perspective. Corporate
Social Responsibility and Environmental Management, 27 (2), 1152-1163. " 

The theories used should also be used for the discussion of the results. Furthermore, the authors should extend the conclusions which, at present, turn out to be too synthetic.

Author’s response:

Thank you so much for the constructive comments. As suggested by the reviewer, we have revised the manuscript accordingly and hopefully can be accepted for publication.

Author Response File: Author Response.pdf

Reviewer 3 Report

The author approached a very interesting topic - Sustainability Reporting Disclosure in Corporates in Indonesian Islamic Corporates. Although the idea of this paper is interesting, its overall merit is highly questionable.

1. “Following the Great Recession of 2008, many people sought an antidote to the economy...”. What are people? Which antidote to the economy? What does it mean “antidote to the economy”?
2. “Questions on Islamic corporate governance were answered differently in three layers approaches”. Who answered?
3. Although the indicators used in the analysis may be important for assessing sustainable development, their quantitative data look far-fetched. For example:

• The SR index in this study used a six-point scale to assess the quality of sustainability reporting. A further explanation should be given, why the 6-point scale was used and how each point is determined. Is 1 bad or 6 bad? What about 2, 3, 4, or 5? "The firms’ sustainability reporting score was calculated in percentages using the un-weighted approach..." Percentage of what versus what?
• The Islamic Corporate Governance Index is determined, among other things, by the presence of a Muslim Chairman. However, it is hardly advisable to judge the quality of government only on a religious basis, because each person can accept faith and its principles in different ways. A Muslim Chairman may be a radical Islamist or more democratic. The example of modern Afghanistan demonstrates different approaches to the governance of different Muslims. Moreover, it is not clear how to quantify the level of, for example, the radicalism of a Muslim Chairman. And to give a grade of 1 or 0 to such deep personal convictions, in my opinion, is overly incorrect. Even if this assessment had a more detailed scale, it would not make it possible to quantify the Islamic corporate governance index determined only on a religious basis. Also, if a Chairman were a Christian, we would not be able to quantify his commitment to sustainability and to corporate sustainability reporting. How could this be done? By the number of church visits? Or the number of prayers read during a service of worship? It wouldn't make sense or be relevant to his business decisions. Human resource management, according to the author, has four aspects. And when the component is expanded, a score of 1 will be given; otherwise - 0. That is, leadership, honesty and other aspects can be assessed on a 2-point scale? In my opinion, this is not enough.

4. The algorithm for calculating the SR, ICG, HG indexes, taking into account the above, looks unreasonable. Moreover, the methodology for their calculations is weak: adding up all indicators of different content and different meanings with indefinite units and dividing such indicators by their number looks ambiguous.
5. The ITU index is also unclear. In what units should we measure HRM, SCM, AF, M? Why ∑HRM but not ∑SCM or ∑ AF? It is not clear.

These examples illustrate the lack of scientific merit. Based on that, I cannot recommend this article for publication.

Author Response

Date: 06 November 2021

Journal of Sustainability

Dear Editor,

We would like to thank you for the letter dated 1 November 2021, and the opportunity to resubmit a revised copy of this manuscript. We would also like to take this opportunity to express our appreciation to the reviewers for the positive feedback and helpful comments for correction or modification. We believe that we have resulted in an improved revised manuscript, which you will find uploaded alongside this document. The manuscript has been revised to address the reviewer comments, which are appended alongside our responses to this letter. We very much hope the revised manuscript is accepted for publication in the Journal. Thank you so much for your help and consideration. We really appreciate it.

Sincerely yours,

Elfindah Princes

on behalf of the authors

Reviewers' Comments to the Authors:

Comment from Reviewer 1 : -

Comment from Reviewer 2

The paper is very interesting but has some important limitations related to the theoretical anchorage. In fact, the authors do not delve into the theories adequately. In this regard, I suggest some papers to consider for the presentation of stakeholder theory and agency theory:

"Vitolla, F., Raimo, N., Rubino, M., & Garzoni, A. (2019). The impact of
national culture on integrated reporting quality. A stakeholder theory
approach. Business Strategy and the Environment, 28 (8), 1558-1571.

Donnelly, R., & Mulcahy, M. (2008). Board structure, ownership, and
voluntary disclosure in Ireland. Corporate Governance: An International
Review, 16 (5), 416-429.

Barako, D. G., & Brown, A. M. (2008). Corporate social reporting and
board representation: evidence from the Kenyan banking sector. Journal
of Management & Governance, 12 (4), 309-324.

Frias - Aceituno, J. V., Rodriguez - Ariza, L., & Garcia - Sanchez, I.
M. (2013). The role of the board in the dissemination of integrated
corporate social reporting. Corporate social responsibility and
environmental management, 20 (4), 219-233.

Vitolla, F., Raimo, N., & Rubino, M. (2020). Board characteristics and
integrated reporting quality: an agency theory perspective. Corporate
Social Responsibility and Environmental Management, 27 (2), 1152-1163. " 

The theories used should also be used for the discussion of the results. Furthermore, the authors should extend the conclusions which, at present, turn out to be too synthetic.

Author’s response:

Thank you so much for the constructive comments. As suggested by the reviewer, we have revised the manuscript accordingly and hopefully can be accepted for publication.

Comment from Reviewer 3

The author approached a very interesting topic - Sustainability Reporting Disclosure in Corporates in Indonesian Islamic Corporates. Although the idea of this paper is interesting, its overall merit is highly questionable.

1. “Following the Great Recession of 2008, many people sought an antidote to the economy...”. What are people? Which antidote to the economy? What does it mean “antidote to the economy”?

Thank you for pointing this out. The reviewer is correct, and we have added the explanation on p. 1.

1. “Questions on Islamic corporate governance were answered differently in three layers approaches”. Who answered?

We have added the needed citations and the revision can be found on p. 1.

1. Although the indicators used in the analysis may be important for assessing sustainable development, their quantitative data look far-fetched. For example:

• The SR index in this study used a six-point scale to assess the quality of sustainability reporting. A further explanation should be given, why the 6-point scale was used and how each point is determined. Is 1 bad or 6 bad? What about 2, 3, 4, or 5? "The firms’ sustainability reporting score was calculated in percentages using the un-weighted approach..." Percentage of what versus what?

We agree with the reviewer’s assessment. Accordingly, throughout the manuscript, we have revised and added more explanation on the indexing processes which can be found on p. 10-13.

• The Islamic Corporate Governance Index is determined, among other things, by the presence of a Muslim Chairman. However, it is hardly advisable to judge the quality of government only on a religious basis, because each person can accept faith and its principles in different ways. A Muslim Chairman may be a radical Islamist or more democratic. The example of modern Afghanistan demonstrates different approaches to the governance of different Muslims. Moreover, it is not clear how to quantify the level of, for example, the radicalism of a Muslim Chairman. And to give a grade of 1 or 0 to such deep personal convictions, in my opinion, is overly incorrect. Even if this assessment had a more detailed scale, it would not make it possible to quantify the Islamic corporate governance index determined only on a religious basis. Also, if a Chairman were a Christian, we would not be able to quantify his commitment to sustainability and to corporate sustainability reporting. How could this be done? By the number of church visits? Or the number of prayers read during a service of worship? It wouldn't make sense or be relevant to his business decisions. Human resource management, according to the author, has four aspects. And when the component is expanded, a score of 1 will be given; otherwise - 0. That is, leadership, honesty and other aspects can be assessed on a 2-point scale? In my opinion, this is not enough.

Thank you for pointing this out. Although we agree that this is an important consideration, it is beyond the scope of the research in this manuscript. We have added the detail on how we quantify the ICG indexing score. The use of the four dimensions were adapted the previous study by (Haniffa & Cooke, 2005). Hopefully, you can find this acceptable.

1. The algorithm for calculating the SR, ICG, HG indexes, taking into account the above, looks unreasonable. Moreover, the methodology for their calculations is weak: adding up all indicators of different content and different meanings with indefinite units and dividing such indicators by their number looks ambiguous.

1. The ITU index is also unclear. In what units should we measure HRM, SCM, AF, M? Why ∑HRM but not ∑SCM or ∑ AF? It is not clear.

We really appreciate your feedback. Allow us to explain that the ∑ is used to represent the sums of all measurements. We did not put the sigma shape for all measurements as we think it would be simpler to see. Hopefully you can find this explanation acceptable. We have tried our best to address all your comments. Thank you so much for giving us so many inputs and constructive comments.

Author Response File: Author Response.pdf

Reviewer 4 Report

This paper aims at examining how Human Governance, Islamic Corporate Governance, or Information Technology Usage affect Sustainability Reporting Disclosure in Indonesian Shariah-compliant companies. Although it raises a potentially interesting issue, its overall perception is low, as it is written in a patchwork manner, in some places carelessly and providing relatively limited empirical evidence (the empirical part is clearly underdeveloped). For now, the paper needs an overhaul.

Remarks:

• the topic suggests some general perspective on the problem, whereas the analysis is limited to very specific set of public companies in Indonesia (shariah-compliant); as the authors emphasize the context of Islamic finance, this fact should be reflected in the title  
• my concern relates to empirical part – the Authors limit the data just to the 70 companies from Indonesian stock exchange (then bootstrapping the samples) and take just one year (2019) into consideration - this is not much as for providing unbiased results and enabling general conclusions to be drawn. Moreover, although the data covers companies from 3 sectors, the study does not take into account the cross-sectoral differentiation – in my opinion, collecting additional data (more years, possibly more sectors) would significantly improve the analysis and allow the use of panel models, which seem to be more appropriate in this case. Additionally, distinguishing between shariah-compliant and non shariah-compliant companies could shed some additional light on the specificity of Islamic corporate governance
• tables 1 and 2 cover to some extent the same data – combining them into one and reducing the number of statistics (e.g. variance and standard deviation could be reduced to just one of them, the other is not necessary) would make the text more compact and more readable
• literature review and hypotheses development is quite extensive and organized in a patchwork way - the Authors should make it more concise and reorganize the section by building three consecutive building blocks, each of which has both theoretical and empirical foundations for single hypothesis; section 2 could be renamed into “Literature review and hypotheses development”
• section 3 – I suggest to entitle it simply: “Methodology and data”
• section 4 requires some modification – apart from a possible change of the methodology and extension of the data set (what has been mentioned earlier), in the present form this section reads oddly – e.g.  in the descriptions, the numbers from the tables are rewritten without any substantive comment. The reader can see the results, so there is no need for repeating what has been presented in tables (e.g. “The result shows that: First, HG is significantly positive to SR with the significance value of 0.004 < 0.05. Second, ICG is significantly negative to SR with a significance value of 0.003 < 0.05. Third, ITU is not significant to SR with the significance value of 0.108 > 0.05”), but what are the consequences of this relationship, what can a reader learn from this?  
• the discussion should provide a detailed interpretation of the results with links to the relevant theories and empirical findings – in the present form is relatively concise and requires some more development
• text formatting is strongly recommended (e.g. tables, font color in table 4 or table 6)
• These edits are essentially proofreading, e.g.:
  • 5: inconsistent notation of abbreviation TOE, e.g. T-O-E factors or TOE framework

Author Response

Please see the attachment. Thank you so much. 

Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

Well done. Congratulations to the authors. 

Author Response

Dear Reviewer,

Thank you so much for the constructive comments and support to make this paper better. We really appreciate it. 

Best regards,

Elfindah

Reviewer 3 Report

Although I disagree with the authors' arguments in favor of the Islamic Corporate Governance Index, since I believe that the management quality definition based on faith is incorrect and cannot determine the management quality, I suppose that this may make sense in some cases.

Author Response

Dear Reviewer,

Thank you so much for your understanding and constructive comments. We realize that we must do better next time. As for this research, we try to revise it one more time. Hopefully this time, the manuscript quality is better. Again, thank you for everything. We really appreciate it. 

Reviewer 4 Report

The authors didn't take into account all of my remarks and resigned from the opportunity of transforming the paper into high quality publication. However, it looks slighly better after the revision and meets the minimum requirements for scientific publications  Nevertheless, some edits are still needed, e.g. formattting of tables is still strongly recommended.

Author Response

Dear Reviewer,

First of all, we would like to say thank you very much for the constructive comments and we also would like to apologize for the table formatting mistakes. We admit that we have taken the wrong references for the table formatting. We have revised the manuscript one more time and hopefully the paper is better and can be accepted for publication. We really appreciate it. 

Best Regards,

Elfindah Princes

On behalf of the authors.