CSR expenditure and Islamic bank performance: the moderating role of Sharia supervisory board characteristics

Purpose This study aims to examine the moderating effects of Sharia supervisory board (SSB) characteristics, specifically accounting background and gender diversity, on the relationship between corporate social responsibility (CSR) expenditure and Islamic bank performance in Indonesia. Design/methodology/approach This study uses dynamic panel data analysis for 16 Islamic Banks in Indonesia covering 2017–2023. In addition, the authors apply generalized least squares to ensure the consistency of the main findings. Findings The first finding shows a negative relationship between CSR expenditure and Islamic bank performance (IBP). The second finding reveals that CSR expenditure moderated by SSB members with accounting backgrounds significantly improves IBP. This demonstrates the vital role of SSB accounting expertise in supervising Islamic bank activities to maintain and enhance reputation and performance. Conversely, SSB gender diversity does not significantly moderate the CSR−performance relationship. These findings indicate the ability of professionally qualified SSB members to ensure banking product conformity with Sharia principles and enhance the effectiveness of Islamic bank strategies in maximizing fundraising and fund distribution performance. Practical implications This study has excellent value for Islamic bank management regarding the effectiveness and efficiency of CSR expenditure and the selection of members of the Islamic supervisory board with accounting education background. Originality/value This study investigates in depth the decision to spend of CSR activities in the Islamic banks and the competencies possessed by SSB with an accounting education background and gender diversity at the Islamic bank.