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Exploring the Ethical

the communicated and ideal ethical identities of such corporations. We developed a research instru- ment based on our understanding of the Shari’ah as well as the extant Islamic and corporate social responsibility literature to reflect the ideal ethical identity. Using content analysis, corporate annual reports for the period 2002–2004 of seven IBs in the Arabian Gulf region were scored based on the re- search instrument developed for the purpose. The results are expressed in the form of an index, which we termed the Ethical Identity Index (EII): a high index indicates less variation and more inclination towards the ideal ethical identity while a low index suggests otherwise. The IBs surveyed were ranked based on the index under each dimension for each year.

Our survey results indicate the highest and lowest 3-year mean EII to be 0.65 (BIB) and 0.16 (ARB), respectively. This means that 65% of the constructs in our ideal ethical checklist have been communicated in the case of BIB and only 16% for ARB. The 3-year mean EII for the remaining five IBs ranged from 0.28 to 0.48, suggesting a large disparity between the communicated and ideal ethical identities. We also found the index of each bank to vary across the 3-year period, suggesting that communication is not static and often minimal. This may be attributed to a lack of pressure from and an indifferent attitude of stakeholders and also the prevailing secretive culture in the region. We further found the largest incongruence between the communicated and ideal ethical identities to be under four dimensions: commitments to society; their vision and mission; contribution and management of zakah, charity and benevolent loans; and infor- mation about top management. The findings are surprising because IBs, as social and economic institutions, are expected to communicate more on those dimensions to reflect accountability and jus- tice not only to society, but also ultimately to God. Hence, managers of IBs may need to reflect on their communication management strategy as well as their image and reputation, not only from an ethical point of view but more importantly, from the perspective of religion. Good corporate com- munication and literature are vital for IBs to promote their corporate ethical identity. Unfortu- nately, some IBs put little effort into communi- cating their values in a consistent manner and

Identity of Islamic Banks


ensuring congruence between their rhetoric in the annual report and the ethical benchmark based on Shari’ah.

Our findings have important implications not only for managers of IBs in the region but also in other countries, such as Malaysia, Indonesia and Pakistan, where there is a large demand for Islamic banking products and services. Managers of IBs need to communicate more effectively and avoid ambig- uous styles of communication, as these have important religious implications as well as implica- tions for corporate image and reputation. Our findings also have important implications for aca- demics and researchers in the area, as they pave the way for further investigation.

Limitations and future research

Our exploratory survey of communication in annual reports adds to prior related studies on corporate identity that have focused largely on the Western and capitalistic context and are less explicit con- cerning religion. However, the findings of this re- search are subject to several limitations. First, our study focused only on comparing the communicated and ideal ethical identities. Future research may want to consider comparing between (a) actual and com- municated and (b) actual and ideal ethical identities. Such comparisons could provide evidence of the extent to which IBs engage in intentional distortions in their annual reports in efforts to enhance their ethical identities.

Second, our study focused only on communica- tion in corporate annual reports even though it is known that management utilises other mass com- munication mechanisms. Hence, future research may consider disclosures in other media such as newspapers and in-house magazines. Since we re- stricted our sample to only IBs in the Arabian Gulf region, future studies can be extended to IBs in other countries as well as to conventional banks with Islamic windows.

Third, future research may consider other meth- odological approaches and also improve our research instrument. For instance, survey work involving more detailed interviews with management and stakeholders may help to enhance our understanding of the phenomenon.

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