Intellectual capital reporting practices in an Islamic bank: A case study

• Author: Mohobbot Ali,Mohammed Mehadi Masud Mazumder,Ataur Rahman Belal
• Date: 01 April 2019
• Published date: 01 April 2019
• DOI: http://doi.org/10.1111/beer.12211

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  wileyonlinelibrary.com/journal/beer Business Ethics: A Eur Rev. 2019;28:206–220.

© 2018 John Wiley & Sons Ltd

1 | INTRODUCTION

In the context of sig nificant eros ion of trust in the i nterest‐based

conventional ban king system, Islamic bank ing has emerged as an al‐

ternative form of in terest‐free banking s ystem with str ong growth

potential. Islamic banking is considered to be an ethical banking sys‐

tem as it strives to co nduct its operations i n an ethical manner with

an ethical ide ntity (Belal, A bdelsalam , & Nizamee, 2015; Han iffa &

Hudaib, 2007; Ullah , Jamali, & Harwo od, 2014). It does not allow

interest‐based pro ducts and pr omotes the concep t of risk sharing

rather than ris k shifting. It co nsiders intere st‐based system as ex‐

ploitative which goes against the spirit of Sharia. Islamic integrity

and moralit y heavily influe nce the operati ons of these bank s. They

are not allowed to inves t in controversial sectors such a s gambling,

pornography, and tobacco. Islamic banking industry has seen signif‐

icant growth i n recent times (E&Y, 2012). Muslim majority coun tries

played a dominant ro le to develop such a ban king system. Ba ngladesh

is one such country where our case bank (SB hereafter, pseudonym

of the case orga nisation) was est ablished. It c an be argued th at

unique knowledge base in an ethical alternative banking, which is

drawn from the pr inciples of Islamic laws (Shar ia), and the organisa‐

tion’s ability to uti lise its intellectual cap ital‐related potential is one

of the main sources of c ompetitive ad vantages for thi s type of or‐

ganisation (Kee nan & Aggestam, 2001; Naha piet & Ghoshal, 1998).

Therefore, th ese banks are expected to have si gnificant intellectual

capital. Bu t we know very little or noth ing about how and why such

information is re ported in the corpor ate reports of thes e banks. This

paper attemp ts to address this gap in the l iterature.

Our paper is signi ficant for two r easons. Firs t, given the eme r‐

gence and sheer size of t he Islamic bank ing and finance in dustry it

is importa nt to know the source s of its organis ational advant ages.

It can be argue d that the competitive advanta ge of Islamic banks is

Received: 5 Augu st 2016 

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  Revised: 20 Septe mber 2018 

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  Accepted: 24 Septem ber 2018

DOI: 10 .1111/bee r.12211

ORIGINAL ARTICLE

Intellectual capital reporting practices in an Islamic bank: A

case study

Ataur Rahman Belal1 | Mohammed Mehadi Masud Mazumder2 | Mohobbot Ali2

1Sheffield University Management

School, The U niversity of Shef field,

Sheffield, United Kingdom

2Departm ent of Accounting & Infor mation

Systems, Unive rsity of Dhaka, D haka,

Bangladesh

Correspondence

Ataur Rahma n Belal, Sheffie ld University

Management S chool, The Univer sity of

Sheffiel d, Conduit Road, Sh effield S10 1FL,

United Kingdom.

Email: a.r.belal@sheffield.ac.uk

Abstract

Given the nature and im portance of Islam ic banks in recent time s, we can expect

them to have significant i ntellectual cap ital anchored in th eir Sharia‐based kn owl‐

edge and expert ise. However, we know very little or nothing about h ow and why in‐

tellectual cap ital‐related informat ion is provided in their cor porate report s. We fill

this gap in our existi ng knowledge of the field with a view to enha nce relevant litera‐

ture. As far as we know, this ar ticle is one of the ear liest explorato ry attempts to

examine intellec tual capital rep orting prac tices of an Islamic bank . We have under‐

taken a longitudinal ( 2001–2015) case study related to the inte llectual capital repor t‐

ing practices of an Is lamic bank. Key result s include signific ant rise of intellectu al

capital repor ting over time, dominance of internal c apital‐related items in intellec tual

capital repor ting profile and the dynamic s of changes in intellectual capita l reporting

practices over tim e. Through an instit utional theor y lens, we explain that this is due

to the changes in the ex ternal instituti onal environment and v arious intra‐orga nisa‐

tional factors s uch as strong ethic al culture, unique kn owledge base (Sharia), and

corporate governance reg ime.

KEYWORDS

Bangladesh , case study, external cap ital, human capital , intellectual capit al reporting, inter nal

capital, Islamic banking