The financial reporting objective and stakeholder identification of waqf institutions : an exploratory study

Abstract

This study investigates why waqf institutions in Malaysia prepare their financial reports and to whom this financial information of waqf is disseminated. The potential of waqf as a sustainable economic resource and the absence of reporting framework and accounting standards for waqf present an opportunity to explore the financial reporting objective of waqf institutions and the identification of waqf stakeholders. The thesis discusses the possibility of adopting decision-usefulness and/or stewardship/accountability as the reporting objective(s) by waqf institutions in Malaysia. The thesis also uses the stakeholder identification and salience model (MAW model) by Mitchell, Agle, & Wood (1997) to identify the stakeholders of these institutions and analyse their salience level with respect to their relationship with waqf management. Semi structured interviews are employed to understand the perception of waqf managers on the objective of financial reporting by waqf institutions. The identities of waqf stakeholders have been identified through this method as well. This data collection method is complemented by documentary analysis. The study finds that both decision-usefulness and stewardship/accountability objectives may be adopted by waqf institutions in Malaysia with different emphasis in preparing their financial reports. Those waqf institutions which engage more on non-income generating activities and providing social welfares may adopt stewardship/accountability as their primary reporting objective and decision-usefulness as their secondary objective. Waqf institutions which focus more on the income-generating activities to support the social element of waqf may adopt decision-usefulness as their primary reporting objective and stewardship/accountability as their secondary reporting objective. The interviews also reveal that there are 18 stakeholders of waqf institutions in Malaysia. Out of these, five groups of waqf stakeholders are perceived as salient stakeholders that waqf management should give higher priority in addressing their competing claims. This study provides useful inputs for both waqf managers and regulators which may subsequently help to improve the financial reporting practice of waqf institutions and eventually enhance the accountability of this Islamic institutions in the third sector ecosystem.