Examining the Effects of Environmental, Social, Governance, and Islamic Social Reporting on Islamic Bank Reputation: The Mediating Role of Firm Performance

Abstract

Background: The increasing demand for transparency and accountability in Islamic banking highlights the importance of identifying the determinants of reputation as a strategic asset.
Purpose: This study examines the effects of environmental, social, and governance performance and Islamic Social Reporting (ISR) on Islamic bank reputation, with firm performance serving as a mediating variable.
Design/methodology/approach: This study employs a quantitative explanatory design using panel data from 12 Islamic commercial banks in Indonesia over the 2020–2024 period, resulting in 60 data sets. The data were analyzed using path analysis and the Sobel test to assess the direct and indirect relationships among the variables.
Findings: Environmental performance and Islamic Social Reporting do not significantly affect Islamic bank reputation, whereas social and governance performance have significant effects. Firm performance does not mediate the relationships between environmental performance, social performance, or Islamic Social Reporting and Islamic bank reputation. However, firm performance mediates the relationship between governance performance and Islamic bank reputation. These findings highlight the role of governance quality in strengthening firm performance and corporate reputation.
Conclusion: The findings indicate that social and governance performance are significantly associated with Islamic bank reputation, whereas environmental performance and Islamic Social Reporting are not. The results suggest that different sustainability dimensions may generate different levels of stakeholder recognition.
Originality/value: This study contributes to the literature by simultaneously examining environmental, social, governance, and Islamic Social Reporting dimensions and the mediating role of firm performance in explaining Islamic bank reputation.

Keywords: reputation of islamic banks, environmental, social, governance, islamic social reporting, firm performance