Examining the effects of institutional pressures, social capabilities and slack resources on company performance : the mediating role of corporate zakat commitment

Abstract

Despite a small number of the Shariah listed companies contributing to corporate zakat, the amount of zakat collection increased slightly in recent years. Zakat-paying companies utilised zakat payment as part of their CSR activities through the wakalah zakat concept, whereby zakat institutions returned the zakat money to spend on identified recipients or asnaf. CSR activities among companies have been widely discussed in the literature. However, the relationship between CSR activities and corporate zakat commitment was hardly discussed. This study considers paying and utilising zakat payment as part of the companies’ CSR activities a corporate zakat commitment. This study raises important questions of to what extent CSR drivers motivate zakat-paying companies to practice corporate zakat commitment and their effects on a company’s financial performance. Another question is to what extent corporate zakat commitment mediates the relationship between institutional pressures, social capabilities, slack resources, and company performance. To answer these questions, this study developed hypotheses that were tested using the survey method on zakat-paying companies involving six zakat institutions in Malaysia which are Pusat Pungutan Zakat Wilayah Persekutuan (PPZWP), Lembaga Zakat Selangor (LZS), Lembaga Zakat Kedah (LZK), Majlis Agama Islam Dan Melayu Pahang (MAIMP), Majlis Agama Islam dan Adat Istiadat Melayu Kelantan (MAIK) dan Pusat Zakat Sabah (PZS). This study analyses whether institutional pressures (coercive, normative, and mimetic pressures), social capabilities (mission-driven and stakeholder management capabilities) and slack resources motivate companies to become committed to zakat. Since the State administration is not strict in corporate zakat enforcement, many companies do not consider zakat commitment necessary. While pushing non-paying companies to pay zakat when it is not compulsory is challenging, it is more critical to determine strategies to motivate others to pay zakat. The research methodology began with a scale development through a literature review. In the second stage, questionnaires were distributed to companies paying zakat to six zakat institutions. Since the information of zakat payers is subject to the Personal Data Protection Act, only 6 zakat institutions agreed to share information on the list of zakat paying companies for research purposes. The company contact details must be obtained through websites such as the company's website and social media. From there, the telephone number or email address obtained was used to contact the individual responsible for the company's zakat management. The first contact was initiated to obtain the specific contact information for the right individual to answer the questionnaire. Once the right person in charge was determined, the questionnaire was then emailed or distributed through whatsapp. 142 questionnaires were analysed using partial least square-structural equation modelling where A 5-point Likert scale was used to measure the constructs. The findings show that normative pressures, stakeholder management capabilities, and slack resources have an impact on corporate zakat commitment. Corporate zakat commitment has a significantly positive influence on all company performance measures (financial performance, employee commitment and corporate reputation). This study contributes to the institutional and social Resource-Based View Theory by extending the theories with the inclusion of Islamic social activity, namely corporate zakat commitment. Managerially, the study provides insights into adaptable strategies to turn non-paying zakat companies to commit to paying corporate zakat.