The concept of corporate social responsibility (CSR) has been developed and promoted since the 1960s, as part of the changing nature of the corporate working environment, with the objective of corporations having their share in contributing to social good in the economy and in society. CSR, as a concept and practice, is directly related to Islamic banking operations, since Islamic finance is located within Islamic moral economy, which essentialises social justice. The Islamic banking sector, therefore, is required by the nature of Islamic injunctions and principles to produce outcomes that are in line with the larger social expectations, namely CSR, with the objective of delivering long-term economic benefits but also to help society.
The main aim of this research, therefore, is to analyse the CSR attitudes and practices of Islamic banks in the GCC region through their CSR disclosure practices. This research further aims to examine empirically the impact of CSR disclosure practices of the GCC Islamic banks on their financial performance.
In fulfilling the research aim, annual reports of GCC Islamic banks for the period 2000- 2011 are scored by using content analysis. The CSR disclosure index is constructed based on the eight dimensions developed for this purpose. Despite the high expectations of full disclosure and accountability, the research findings do not produce encouraging results in terms of CSR or the social outcome of Islamic banks in the GCC region. The majority of GCC Islamic banks disclose significantly less than required, as CSR disclosure indices for all the Islamic banks remain very low in comparison to the overall score but also for each of the CSR dimensions included in the indices.
While examining the impact of CSR disclosure practices on financial performance of Islamic banks in the GCC region, the results indicate the positive relationship between CSR disclosure and financial performance. These results are in line with the set hypotheses and discussed theoretical framework that predict a positive link between corporate social and financial performance in the Islamic banking industry
