Corporate zakat as a strategic instrument towards financial performance, employee commitment and corporate reputation
DOI:
https://doi.org/10.24191/jeeir.v14i2.11485Keywords:
Corporate Zakat, Financial Performance, Employee Commitment, Corporate ReputationAbstract
Corporate zakat is a voluntary contribution by companies to the designated recipients as highlighted by the Islamic law. Corporate zakat is also one of the sustainable resource and strategic instruments for implementing corporate social responsibility (CSR) initiatives, bringing positive values to the company. However, a lack of awareness could cause the corporate body to be reluctant to pay corporate zakat, as they cannot see the impact of corporate zakat on their company performance. This paper aims to examine the impact of corporate zakat as a strategic CSR instrument on the company performance measured by financial performance (FP), employee commitment (EC), and corporate reputation (CR). Data was collected through a survey distributed to the top management across 142 companies. The responses were analyzed using Smart PLS, through nonparametric analysis and variance-based structural equation modeling with partial least squares (PLS-SEM) to accommodate multivariate and non-normal data distributions. The results reveal a significant positive relationship between a company’s commitment to corporate zakat and its FP, EC, and CR. The structural model estimation confirmed that all three hypothesized paths were positively supported. These findings indicate that companies unlock various competitive advantages through their involvement in corporate zakat. The study highlighted that zakat commitment serves as a strategic instrument for CSR, provides positive encouragement to companies to maintain corporate zakat payment, and motivates non-zakat-paying companies to start participating. A deeper understanding of the concept would further motivate top decision-makers to adopt a corporate zakat program.
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