The extent of voluntary disclosure in the annual reports of Islamic banks: empirical evidence from Yemen

This article aims to measure the level of voluntary disclosure in the published annual reports of Yemeni Islamic banks. Four full-fledged Islamic banks from Yemen are selected for the current study. A disclosure checklist covering 266 items is prepared and a 10-year period, 2005–2014, is taken. The disclosure index items were classified into seven groups, such as basic information on Islamic banks, financial ratios, corporate governance information, financial statements data, corporate social disclosure, Zakat information


INTRODUCTION
The Islamic financial system has expanded quickly over the past few years. It has developed extensively around the world, including the Middle East, Southeast Asia, European countries, and even North American countries. The current goal of Islamic financial institutions is to attract investors seeking to avoid interest. As interest in Islam is prohibited, Islamic banking must avoid any interest (Bintawim, 2011). Islamic investment banking and Shariacompliant financial instruments, which form the core of Islamic banking, have been one of the fastest growing financial market segments operating across more than 300 organizations in 75 countries (Cihák & Hesse, 2008). Uyar and Kilic (2012) define corporate transparency to improve information disclosure through various media, such as annual reports, corporate websites, press releases and annual reports, to reduce information asymmetry among executives and investors. Meek, Roberts, and Gray (1995) consider voluntary disclosures as divulgations that meet specifications. Lee (1987) determined data as an interaction feature that improves recipient knowledge and decreases future uncertainty. The Financial Accounting Standard Board (FASB, 2001) described voluntary reporting as "disclosure, mainly outside financial information that is not expressly mandated by accounting or regulatory standards." Academic researchers often classify voluntary disclosures into three categories, namely the disclosure of political, financial and non-financial data (Eng & Mak, 2003;Meek, Roberts, & Gray, 1995).
This study seeks to fill the current gaps in the disclosure literature by focusing on economic justice and poverty eradication as main themes in Islamic companies. The study is also special in its efforts to use critical conceptual lenses and imminent criticism of Islamic accounting analysis and in its aims to provide insights into the interaction between religions (especially Islam) and critical theory (Kamla, 2009;Shapiro, 2009). In doing so, the current study has gone beyond the few previous studies on disclosure of Islamic banks to illustrate the conflicting language in the values and practices of Islamic companies. Addressing such inconsistencies offers Islamic banking institutions (and their stakeholders) a chance to realize their actual role in society and to assert them in that position. It is hoped that this realization may help change the social role of Islamic financial institutions in the future.
The results of voluntary reporting scores show that Yemeni Islamic banks' degree of voluntary disclosure has significantly increased over the ten years examined. The analysis shows that the executives of Yemeni Islamic banks are more willing to reveal additional information linked to Zakat data than other types of data. However, they have no capacity to provide social data in their annual reports. The study also reveals that those who compiled annual reports of Yemeni Islamic banks have voluntarily revealed some data on the background/general information of an Islamic institution, the financial statistics, corporate governance information, corporate social reporting, Zakat data, and other data, but those details that they offer to the public in their reports are still not enough.
The rest of this article is structured as follows: Section 1 discusses the literature. The research methodology is set out in Section 2. Section 3 presents data and findings. Finally, the last section concludes.

LITERATURE REVIEW
Many previous studies examined voluntary disclosure in annual reports of Islamic financial institutions in different countries ( Amran et al. (2017) found that CSR reporting of Islamic banks has generally increased in both Malaysia and Indonesia. More precisely, workplace and society dimensions were found to be the most commonly reported areas by Islamic banks in both countries. Farook, Hassan, and Lanis (2011) revealed that disclosure of corporate social responsibility (CSR) by Islamic banks varies significantly across the study. Regression results and variety are best illustrated by variables of "influence of the relevant public" and Corporate Governance Mechanism Shari'ah (SSB Supervisory Boards).
Harun (2016) revealed very poor CSR reporting (39.9%) in GCC countries. The findings showed that a powerful positive relation was between both the CSR reporting and the size of the boards of directors. The author also showed a significant negative correlation with the CEO. Darmadi (2013) confirmed that Bank Muamalat and Bank Syariah Mandiri, two largest and oldest Islamic financial institutions in Indonesia, scored above their peers. It is observed that transparency of sample banks in terms of certain aspects, such as board members and risk management, is powerful.
Darmadi (2013) stated that these banks complied with the AAOIFI particular presentation and transparency guidelines in the financial results by an average of 44.68% (90 items out of 203). The standard deviation of the total enforcement score is 3.14, which indicates a very weak difference in this respect for Islamic banks. Wardayati and Wulandari (2014) revealed that the ISR disclosure rate of Islamic banking institutions in Indonesia was higher than that of Islamic banks in Malaysia. Abdullah, Percy, and Stewart (2015) found that the average rate of voluntary governance reporting was less than 40%. They demonstrate that better enterprise governance related to a higher degree of voluntary transparency of corporate governance.
According to Ahmad and Daw (2015), the degree of compliance with the AAOIFI guidelines for general reporting and disclosure in the financial reports is poor. Srairi (2015) showed that Islamic financial institutions comply with the CGDI attributes at 54%. The results related only to two countries, the United Arab Emirates and Bahrain. Meutia and Febrianti (2017) noticed that the level of ISR of Islamic banking in Indonesia was higher than that in Malaysia. There are substantial differences between the two classes with respect to all news topics. Zubairu, Sakariyau, and Dauda (2012) have revealed that Islamic financial institutions in Saudi Arabia currently are more dominant in comparison to their conventional peers than Shari'a-based financial institutions. Abdullah, Percy, and Stewart (2013) report that disclosures related to SSB and Zakat are still restricted, with only four financial institutions revealing more than half of the SSB ranking.
Abdullah, Percy, and Stewart (2014) showed that the rate of CG reporting of Islamic institutions was less than 50% in annual information reports. According to this investigation, the features of the integrated CG and Shari'ah Board of directors (SSB) contributed significantly to voluntary CG disclosures. Sellami and Tahari (2017) found a wide variation in enforcement rates between the reporting accounting standards and the country of residence. Hassan and Harahap (2010) indicated that the total average CSR disclosure index of one of the seven Islamic financial institutions was above average and that CSR issues were not of concern to most Islamic banking institutions. Rini (2014) revealed that representation fidelity was regarded by the internal group of Islamic banks as the most important factor. Table 1 summarizes studies on this topic.

METHODS
For the purpose of this study, the descriptive analysis is used and the study period is 10 years, from 2005 to 2014. The population of the sample is five Islamic financial institutions within the period of research. Three Islamic banks have been chosen based on the study criteria. The main criteria for including a bank in the sample are based on the following: • Availability of financial reporting information on the website.
• The bank should be established by 2005.
As to the second criterion, one bank was removed because it was established after 2007. Voluntary disclosure assessed by seven categories, such as background on Islamic banks/general information, financial indicators and other statistics, corporate governance data, financial statements Zakat information and other data, was taken as an important attribute and measure of the financial reporting system.

Scoring the voluntary disclosure index
The assessment of the level of voluntarily reporting for each year in the sample in financial statements for each Islamic company involves ranking the voluntary disclosure index. A rating comprising the list of 266 voluntary reporting items was drawn up (see Table A1, Appendix A). Cooke (1989) shows that there are two approaches, weighted and unweighted, to assess the measure of company transparency. As shown by prior studies, the two major methods have also been noted to be commonly used in constructing a rating system to measure transparency (Barrett, 1977;Courtis, 1979;Haji & Ghazali, 2013;Marston, 1986); and the unweighted method to ranking (dualistic scoring) adopted by Cooke Many previous studies also used both methods (Hossain, 2008). The scoring methodology used in this analysis is unweighted; it suggests all pieces of data are considered especially relevant to all groups in the annual published reports of Islamic financial companies. An element scores one if revealed, and zero if not revealed.
For each year, a disclosure index was prepared to evaluate the degree of total voluntarily transparency in each Islamic institution in the study, including voluntary transparency index products. The overall voluntarily reporting indicator rating was then determined as the real voluntary transparency score ratio (AVDS) for every one of the 30 financial reports from Islamic institutions under review, granted to Islamic financial institutions separated by the Minimum Voluntary Disclosure Score (MVDS) that is required to be won by that specific Islamic company.
The total voluntary disclosure index score (TVDIS) for each Islamic financial bank per year is measured as follows: • The Actual Voluntary Disclosure Scores (AVDS) for each Islamic financial institution in the survey sample for each year are calculated as follows: where AVDS = Actual Voluntary Disclosure Score per Islamic bank; dj = 1 if the j information item is disclosed in yearly reports; dj = 0 if the j information item is not disclosed in yearly reports; n is the total of information items that an Islamic financial bank is expected to disclose.
• The Maximum Voluntary Disclosure Score (MVDS) expected to be earned by an individual commercial bank is estimated as follows: where MVDS = Maximum score on voluntary disclosure; n = the number of knowledge items required to be published in the voluntary disclosure index, where n = 63.
Therefore, the Total Voluntary Disclosure Index Score (TVDIS) for the individual bank for each year is calculated as follows: Maximum Voluntary Disclosure Score (MVDS) = Actual Voluntary Disclosure Score (AVDS) for each Islamic institution per year (its value ranges from zero to one). The percentage is then compounded by 100 to translate to the percentage and round to the closest whole number. In its reported financial statements, an Islamic bank with better transparency indicates a greater degree of voluntary disclosure.

Total voluntary disclosure in published annual reports of Islamic financial institutions
To calculate the magnitude of the overall disclosure index score (i.e. TVDIS) over the ten years for each of the three Islamic institutions, a rating sheet for self-disclosure was developed, consisting of 266 voluntary items divided into seven data categories, and then the dualistic method was used to obtain disclosure score of Islamic institutions, i.e. TVDIS.
The dualistic scoring gives one if an Islamic institution reveals a particular item and null if it does not show it. Therefore, for an individual Islamic institution, a comparative voluntary disclosure index (comprising independent factor in this study) was determined by the proportion of the product range reported by an Islamic financial institution to the total number of items for every year (266) that are expected to be reported in the financial statements by each Islamic bank (see Table 3).     Substantially, the results of the voluntary transparency scores show that the degree of voluntary transparency by Yemeni Islamic financial institutions during the ten years studied has significantly increased (see Table 3).   Note: * Y t means total voluntary disclosure score (TVDIS) in the following year, whereas Y t -1 means the total voluntary disclosure score (TVDIS) in the previous year".
The above shows that the amount of voluntary disclosure of Yemeni Islamic banking institutions in their annual reports has gradually increased over the ten years examined.  More precisely, the general information of an Islamic bank (Group A) has a maximum transparency score of 47.37% and a minimum transparency score of 33.16%. Whereas financial ratios and other details (Group B) have an average divulgation score of 20.83% and a minimum divulgation score of 20%. Corporate governance information (Group C) has a max transparency score of 31.11%, while the min disclosure score was 20.56% over the ten-year period analyzed. The voluntary disclosure of the seven information groups has improved. Furthermore, the differences between them have been relatively high. Table 6 and Figure 1 show that the distribution of the overall disclosure (Group A) over the 10 years is marginally increased; the average disclosure is 31.6%, 35 On the other hand, disclosure of the financial ratios related to voluntary disclosure has shown no improvements over the 10 years and stayed the second lowest reported group in the current research. Moreover, the level of voluntary reporting of corporate governance, as presented in Figure 1, has fewer improvements over the ten years; the average score of disclosure was 23% in 2005, 22% in 2006, 26% in 2007, but in 2014, the disclosure score amounted to 28%. There is a small disclosure score related to (Group D) financial statements information over the ten years of the current study. The mean disclosure score values are 72%, 73%, 74%, 73.6%, 72.7%, 73.6%, 73.6%, 74.2%, 74.2%, and 73% for the tenyear period, from 2005 to 2014, respectively.   Figure 1 shows that the degree of transparency in the annual corporate social disclosure of Islamic banking institutions has increased over the current research period, excluding financial years of 2005 and 2006. The extent of Zakat information transparency over the ten years varies from 29% in 2005 to 33% in 2014. The level of other data disclosure in the last category (Group G) has increased significantly over the last ten years, with its transparency score rising from 42% in 2005 to 58% in 2014. Generally, there has been a gradual increase in voluntary details provided by Yemeni Islamic institutions over the ten years investigated.
The accuracy of such data remains uncertain.

DISCUSSION
This study compares its own findings and the results of previous studies in different countries. As the literature review shows, few studies have focused on the scope of voluntary information transparency of financial services, since most of the previous trans-parency research excludes Islamic banks from their samples. One of the first empirical research is that by Kribat (2009)

CONCLUSION
This article aims to examine the degree of voluntary data disclosure in the annual reports of Yemeni Islamic financial institutions. Four Islamic Sharia-based banks were selected among five Islamic banks operating in Yemen. A disclosure checklist covering 266 items was prepared and a period of 10 years, ranging from 2005 to 2014, was taken for the study. The disclosure index was divided into seven groups, such as basic information on Islamic banks, financial ratios, corporate governance information, information of financial statements, corporate social disclosure information, Zakat information, and other data that have been taken as important attributes and measures of the voluntary disclosure index. The results revealed that during the period under the study, Tadhamon Islamic International Bank (TIIB) reported the highest average disclosure index score over the ten years (2005 to 2014); the second highest average disclosure score was obtained by Saba Islamic Bank (SIB), and the lowest average voluntary disclosure score over the ten years surveyed was achieved by Shamil Bank of Yemen & Bahrain (in Yemen). Substantially, the result of voluntary disclosure scores indicates that the degree of voluntary disclosure by Yemeni Islamic financial institutions has significantly expanded during the ten years investigated. The study has found that no social information is provided in the financial statements of Yemeni Islamic financial institutions.  1 A brief summary of the nature of the bank's activities 2

AUTHOR CONTRIBUTIONS
Date and details of establishment 3 List of branch locations 4 Clear plan and priorities statement (Financial -Advertising -Social) 5 Strategy effect on the existing results 6 Strategy effect on future outcomes 7 New products (services) development 8 Qualitative forecast of revenues 9 Quantitative forecast of revenues 10 Qualitative forecast of profits 11 Quantitative forecast of profits 12 Qualitative forecast of cash flow 13 Quantitative forecast of cash flow 14 Forecast earnings per share 15 Assumptions underlying the forecasts 16 The debate about the company's competitive position 17 Strategy and priorities statement -specific 18 Discussion about the company's financial stability 19 Forecast of R&D expenses

B. Financial performance and other statistical information (24) a. Profitability ratios 20
Return on assets 21 Return on equity 22 Profit margins 23 Net profit ratio 24 Earnings per share b. Liquidity ratios 25 Total liquidity assets to deposits ratio 26 Total liquidity assets to assets ratio 27 Current ratio 28 Cash asset ratio 29 Quick liquidity ratio c. Efficiency ratios 30 Working capital turnover 31 Return on investment 32 Account payable turnover 33 Total asset turnover 34 Fixed asset turnover 35 Operating expense ratio d. Other 36 List of top 5 shareholders of a bank 37 Declaration of relative profits for two years 38 Comparative balance sheet for two years 39 Comparative information for the current and previous year 40 Number of branch extensions during the current fiscal year 41 Dividends per share for the period 42 Disclosure half-yearly balance sheet statement 43 Disclosure half-yearly profit and loss account statement C. Corporate governance information a. Board of directors and management category 44 Chairman of the board identified

List of board members 46
Dissemination of information on senior managers' qualifications and experience 47 Senior executives' reports and membership fees 48 Number of meetings of the board of members and the date 49 Number of senior executives (not members of the board)/senior leadership framework 50 Composition of board of directors 51 Educational (academic or professional) credentials and experience 52 Other directorships held by executive directors 53 Other directorships held by non-executive directors 54 Number of shares owned by management 55 Number of shares owned by managers 56 Number of shares owned by directors b. Audit committee (AC) 57 Auditor report 58 AC consists solely of non-executive directors 59 Two-thirds of members in AC are independent directors 60 The chairman of AC is an independent director 61 One member at least of AC has accounting expertise or experience in the field of finance 62 AC consists of at least three members 63 AC holds regular meetings 3-4 times per year 64 Banks has a formal policy on AC's functions and responsibilities 65 Information of the identities and credentials of the board of directors named 66 The audit committee's position and work 67 Number of committee meetings 68 Attendance at committee meetings 69 External auditor appointed by the bank and suggested by AC 70 Existence of an audit committee 71 Committee reports in the annual report 72 Performance of each committee c. Board's report (05) 73 Director's report 74 Narrative statement of bank's affairs 75 Amount of dividend recommended 76 Narrative discussion of material changes and commitments 77 Narrative discussion of any changes occurring during the financial year d. Sharia supervisory board (SSB) 78 The qualification and experience of members are revealed 79 SSB contains at least three members 80 The bank has formed an internal Sharia review to help the SSB in their task and to carry out an ex post Sharia audit 81 SSB representatives are not required to be members of the board and do not own any of the bank's shares 82 The bank discloses information on remuneration of members 83 The bank has a formal policy on SSB's duties and responsibilities 84 The bank discloses the attendance of every member 85 Details regarding the SSB members' profiles 86 The bank issues an SSB report on the compliance of the Islamic institution activities with the rules of Sharia 87 Report of the Shariah supervisory board 88 Age of the Shariah supervisory board 89 The view of the Shariah Supervisory Board on the accuracy of the measurement of Zakat 90 Statement certifying distribution of profits and losses are made according to Islamic Shariah 91 Statement of recommendations to rectify defects in products 92 Names of members 93 Positions of members 94 Pictures of members 95 Profiles of members