Modified integrated Islamic CSRD index and financial performance of Malaysian Islamic banks: Stakeholders’ perception

PurposeThe purpose of this paper is to examine the relationship between the modified integrated Islamic CSRD index (MIICSRDi) and financial performance of Malaysian Islamic banks as perceived by the stakeholders.Design/methodology/approachThis paper used survey questionnaire with a purposive sample of 343 stakeholders of Malaysian Islamic banks. A theoretical framework was developed and tested by using partial least square analysis.FindingsThe findings reveal that there is a significant positive relationship between the MIICSRDi and financial performance as perceived by the stakeholders.Research limitations/implicationsThere is a lack of empirical research proposing an Islamic CSRD framework that is suitable to be applied within the context of the Malaysian environment. Hence, this paper shows that MIICSRDi in line with the stakeholder theory, Shariah principles and ‘urf principle (customary practice) can be used by Malaysian Islamic banks to increase their performance.Practical implicationsMIICSRDi can be used as one of the strategies to improve the financial performance of Islamic banks. In fact, it can be instilled in the value-based intermediation introduced by Bank Negara Malaysia for the rebranding of Islamic banks.Originality/valueThe relationship between perceived MIICSRDi and perceived financial performance is explained in light of the stakeholder theory, Shariah principles (unity, equilibrium, free will, responsibility and tazkiyah) and ‘urf principle (customary practice).