Islamic Corporate Governance, Organizational Culture and Fraud with Code of Ethics Moderation Empirical Evidence from Islamic Banking in Indonesia

Juni Supriyanto1, & Yvonne Agustine2*
1Doctoral Program in Accounting, Trisakti University, Indonesia
2Faculty of Economics and Business, Trisakti University, Indonesia
*Correspondent author: Yvonne Agustine (221022104002@std.trisakti.ac.id)
DOI – http://doi.org/10.37502/IJSMR.2025.8403

Abstract

The goal of this research is to demonstrate how organizational culture and Islamic corporate governance (ICG) impact fraud in Indonesian sharia banking. Four forms comprise the organizational culture: Group, Market, Adocracy, and Structure. Additionally, the study examines how the Code of Ethics can moderate these effects. The research was conducted using quantitative methods. Using a panel data regression model, data from all Islamic banks in Indonesia from 2015 to 2020 were examined. There were 14 institutions in all. Biplot analysis is used to map the organizational culture of Islamic banking using Principal Component Analysis (PCA). The results of this study indicate that hierarchical, market, and clan cultures, as well as Islamic corporate governance (ICG), directly affect fraudulent actions. Conversely, Adhocracy Culture was found to have no direct impact on fraud. for Islamic Banks, an in-depth analysis is needed regarding the cogency of Islamic Corporate Governance in latest structure associated with existing fraud incidents. In addition, Islamic banks as business entities can refer to organizational culture models, which can prevent fraud. As for the implications for Regulators, the research results state that the Code of Ethics is proven to be able to strengthen efforts to reduce fraud, but currently there is no reference to regulations from regulators that regulate the minimum standard of Code of Ethics in Islamic Banks. Regulators can formulate regulations mandating the adoption of a Code of Ethics in Islamic Banking.

Keywords: Organizational Culture, Islamic Corporate Governance, Islamic Supervisory Board, Islamic Banking.

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