The Influence of Organizational Culture on Financial Reporting Quality: The Mediating Role of Innovation, Risk Management Implementation, and Sustainability Reporting in Sharia Rural Bank
Abstract
This study aims to analyze the influence of organizational culture on the quality of financial reporting in Sharia Rural Bank (BPRS) in Indonesia, by examining the mediating roles of risk management implementation, innovation, and sustainability reporting. The primary issue addressed in this research is the high closure rate of BPRS, which is largely attributed to the lack of integrity and transparency in financial reporting. A quantitative research approach was employed, utilizing purposive sampling techniques to collect data from 129 respondents, including directors, managers, and division heads across various BPRS institutions. Data were gathered through an online questionnaire and analyzed using the SmartPLS software. The findings reveal that organizational culture has a significant positive effect on risk management effectiveness, innovation, and sustainability reporting, all of which subsequently contribute to enhancing financial reporting quality. Moreover, the mediating variables are proven to strengthen the relationship between organizational culture and financial reporting quality. Based on these findings, it is recommended that BPRS institutions foster a corporate culture that promotes innovation, effective risk management, and sustainability in order to ensure reliable and Sharia-compliant financial reporting. Future research is encouraged to explore additional influencing factors, such as corporate governance and information technology, within the context of Islamic banking.
Downloads
References
Abed, I. A., Hussin, N., Haddad, H., Al-Ramahi, N. M., & Ali, M. A. (2022). The moderating effects of corporate social responsibility on the relationship between creative accounting determinants and financial reporting quality. Sustainability, 14(3), 1–23. https://doi.org/10.3390/su14031195
Al-Khonain, S., & Al-Adeem, K. (2020). Corporate governance and financial reporting quality: preliminary evidence from saudi arabia. Financial Markets, Institutions and Risks, 4(1), 109–116. https://doi.org/10.21272/fmir.4(1).109-116.2020
Al-Shaer, H. (2020). Sustainability reporting quality and post-audit financial reporting quality: empirical evidence from the uk. Business Strategy and the Environment, 29(6), 2355–2373. https://doi.org/10.1002/bse.2507
Alkhadra, W. A., Khawaldeh, S., & Aldehayyat, J. (2023). Relationship of ethical leadership, organizational culture, corporate social responsibility and organizational performance: a test of two mediation models. International Journal of Ethics and Systems, 39(4), 737–760. https://doi.org/10.1108/IJOES-05-2022-0092
AlSaied, M., & McLaughlin, P. (2024). Organizational culture enabler and inhibitor factors for ambidextrous innovation. Administrative Sciences, 14(9), 1–28. https://doi.org/10.3390/admsci14090207
Andrew, A., Candy, C., & Robin, R. (2022). Detecting fraudulent of financial statements using fraud s.c.o.r.e model and financial distress. International Journal of Economics, Business and Accounting Research (IJEBAR), 6(1), 211–222. https://doi.org/10.29040/ijebar.v6i1.4394
Anton, S. G., & Nucu, A. E. A. (2020). Enterprise risk management: a literature review and agenda for future research. Journal of Risk and Financial Management, 21(1), 1–22. https://doi.org/10.3390/jrfm13110281
Asir, M., Yuniawati, R. A., Mere, K., Sukardi, K., & Anwar, M. A. (2023). Peran manajemen risiko dalam meningkatkan kinerja perusahaan: studi manajemen sumber daya manusia. Entrepreneurship Bisnis Manajemen Akuntansi (E-BISMA), 4(1), 32–42. https://doi.org/10.37631/ebisma.v4i1.844
Assoratgoon, W., & Kantabutra, S. (2023). Toward a sustainability organizational culture model. Journal of Cleaner Production, 400, 1–18. https://doi.org/10.1016/j.jclepro.2023.136666
Atika, A., & Simamora, A. J. (2024). The effect of corporate culture on sustainability report quality. UNTAR : Jurnal Akuntansi, 28(1), 100–124. https://doi.org/10.24912/ja.v28i1.1761
Atika, A., Utami, E. R., & Simamora, A. J. (2023). Does managerial ability affect segment disclosure? evidence from indonesia. Journal of Accounting and Investment, 24(1), 169–186. https://doi.org/10.18196/jai.v24i1.15975
Azwari, P. C., Naz’aina, N., Barkah, Q., Nuraliati, A., Taufik, A., Rizki, M., & Mulyani, N. (2023). Organizational culture, financial reporting quality, and good governance: evidence from islamic financial institutions. Corporate Governance and Organizational Behavior Review, 7(3), 131–143. https://doi.org/10.22495/cgobrv7i3p11
Beasley, M., Branson, B., Braumann, E., & Pagach, D. (2020). The impact of organizational cultural factors on advancing enterprise risk management sophistication. 1–47.
Bhandari, A., Mammadov, B., Thevenot, M., & Vakilzadeh, H. (2022). Corporate culture and financial reporting quality. Accounting Horizons, 36(1), 1–24. https://doi.org/10.2308/HORIZONS-19-003
Binh, V. T. T., Tran, N.-M., & Vu, M.-C. (2022). The effect of organizational culture on the quality of accounting information systems: evidence from vietnam. SAGE Open, 12(3), 1–12. https://doi.org/10.1177/21582440221121599
Braumann, E. C., Hiebl, M. R. W., & Posch, A. (2024). Enterprise risk management as part of the organizational control package: review and implications for management accounting research. Journal of Management Accounting Research, 36(2), 7–29. https://doi.org/10.2308/jmar-2021-071
Breuer, M., Leuz, C., & Vanhaverbeke, S. (2023). Mandated financial reporting and corporate innovation (eu private firm mandatory). In Working. http://dx.doi.org/10.2139/ssrn.3449813
Candy, C. (2021). Best practice of enterprise risk management: the impact on rurals’ bank performance. International Journal of Economics, Business and Accounting Research (IJEBAR), 5(2), 231–237.
Candy, C., Renaldi, A. J., & Yuwono, W. (2024). Does risk management affect bank performance? Distribusi - Journal of Management and Business, 12(2), 309–322. https://doi.org/10.29303/distribusi.v12i2.509
Chín, W. W. (1998). The partial least squares aproach to structural equation modeling. modern methods for business research. Modern Methods for Business Research.
Ching, H. Y., Gerab, F., & Toste, T. H. (2017). The quality of sustainability reports and corporate financial performance: evidence from brazilian listed companies. SAGE Open, 7(2), 1–9. https://doi.org/10.1177/2158244017712027
Chipeta, C., & Muthinja, M. M. (2018). Financial innovations and bank performance in kenya: evidence from branchless banking models. South African Journal of Economic and Management Sciences, 21(1), 1–11. https://doi.org/10.4102/sajems.v21i1.1681
Cuandra, F., & Candy, C. (2024). Strategies and Innovations for Enhancing Sustainable Performance in SMEs During The 4.0 Digital Business Era. Jurnal Organisasi Dan Manajemen, 20(1), 1–16. https://doi.org/10.33830/jom.v20i1.6449.2024
Duryadi, D. (2021). Metode penelitian empiris, model path analysis dan analisis smart pls. In Semarang: Yayasan Prima Agus teknik, STEKOM.
Eleswed, M. (2019). Organizational culture: an islamic perspective. AAU Journal of Business and Law, 3(2), 26–44. https://doi.org/10.51958/aaujbl2019v3i2p2
Faisal, F., Abidin, Z., & Haryanto, H. (2021). Enterprise risk management (erm) and firm value: the mediating role of investment decisions. Cogent Economics and Finance, 9(1), 1–15. https://doi.org/10.1080/23322039.2021.2009090
Firmansyah, D., & Dede, D. (2022). Teknik pengambilan sampel umum dalam metodologi. Jurnal Ilmiah Pendidikan Holistik (JIPH), 1(2), 85–114.
Firmansyah, E. A., Masri, M., Anshari, M., & Besar, M. H. A. (2024). Innovation in finance: a bibliometric and content-analysis study. Nankai Business Review International, 15(4), 578–594. https://doi.org/10.1108/NBRI-08-2023-0071
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.
Gay, L. R., & Diehl, P. L. (1992). Research methods for business and management. MacMillan Publishing Company.
Gutiérrez-Ponce, H., & Wibowo, S. A. (2023). Do sustainability activities affect the financial performance of banks? the case of indonesian banks. Sustainability, 15(8), 1–17. https://doi.org/10.3390/su15086892
Hakim, A. R. (2024). Ojk sebut 20 bpr bakal ditutup hingga akhir 2024. Liputan 6.
Hamid, R. S., & Anwar, S. M. (2019). Structural equation modeling (sem) berbasis varian: konsep dasar dan aplikasi dengan program smartpls 3.2.8 dalam riset bisnis (1st ed.). PT Inkubator Penulis Indonesia.
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135. https://doi.org/10.1007/s11747-014-0403-8
Heriansyah, H., Sitorus, I. R., & Rahmat, I. (2024). Implementation of islamic organizational culture in indonesian islamic rural bank. Al-Intaj : Jurnal Ekonomi Dan Perbankan Syariah, 10(2), 346–359.
Hu, L., & Bentler, P. M. (1999). Cutoff criteria for fit indexes in covariance structure analysis: conventional criteria versus new alternatives. Structural Equation Modeling: A Multidisciplinary Journal, 6(1), 1–55. https://doi.org/https://doi.org/10.1080/10705519909540118
Huang, H. J., Habib, A., Sun, S. L., Liu, Y., & Guo, H. (2021). Financial reporting and corporate innovation: a review of the international literature. Accounting and Finance, 61(4), 5439–5499. https://doi.org/10.1111/acfi.12764
Ibrahimov, Z., Hajiyeva, S., Nazarov, V., Mazanov, A., & Baghirov, J. (2022). Quality and innovations in the financial reporting as a way to increase attractiveness for institutional investors. Marketing and Management of Innovations, 1(2), 244–254. https://doi.org/10.21272/mmi.2022.2-22
Ifada, L. M., Ghozali, I., & Faisal, F. (2019). Islamic organizational culture, islamic corporate social responsibility, and corporate performance: evidence from sharia bank in indonesia. International Journal of Financial Research, 10(6), 118–123. https://doi.org/10.5430/ijfr.v10n6p118
Iragi, C., & Kyongo, J. (2023). Organizational culture and innovation: an empirical investigation. International Journal of Management and Commerce Innovations, 11(2), 214–219. https://doi.org/10.4324/9781003094944-9
Kanu, M. S. (2020). The role of risk culture in enterprise risk management implementation. International Journal of Business and Management, 15(11), 13–31. https://doi.org/10.5539/ijbm.v15n11p13
Keuangan, O. J. (2017). Peraturan otoritas jasa keuangan nomor 51/pojk.03/2017. OJK.
Keuangan, O. J. (2024). Siaran pers: perkuat integritas, tata kelola dan daya tahan perbankan ojk terbitkan pojk integritas pelaporan keuangan bank. OJK.
Khalifaturofi’ah, S. O. (2023). Cost efficiency, innovation and financial performance of banks in indonesia. Journal of Economic and Administrative Sciences, 39(1), 100–116. https://doi.org/10.1108/jeas-07-2020-0124
Khasanah, R., & Azizah, N. (2022). Development of the halal industry in indonesia: the role of sharia rural bank. Dinar: Jurnal Ekonomi Dan Keuangan Islam, 9(2), 137–144. https://doi.org/10.21107/dinar.v9i2.13989
Kock, N. (2021). Harman’s single factor test in pls-sem: checking for common method bias. Data Analysis Perspectives Journal, 2(2), 1–6.
Lobo, G. J., Xie, Y., & Zhang, J. H. (2018). Innovation, financial reporting quality, and audit quality. Review of Quantitative Finance and Accounting, 51(3), 719–749. https://doi.org/10.1007/s11156-017-0686-1
Madu, M., & Hassan, S. U. (2021). Enterprise risk management and financial reporting quality: evidence from listed nigerian non-financial firms. Journal of Risk and Financial Studies, 2(1), 43–70.
Magsi, H. B., Ong, T. S., Ho, J. A., & Hassan, A. F. S. (2018). Organizational culture and environmental performance. Sustainability, 10(8), 1–17. https://doi.org/10.3390/su10082690
Martínez-Ferrero, J., Garcia-Sanchez, I. M., & Cuadrado-Ballesteros, B. (2015). Effect of financial reporting quality on sustainability information disclosure. Corporate Social Responsibility and Environmental Management, 22(1), 45–64. https://doi.org/10.1002/csr.1330
Naranjo-Valencia, J. C., Jiménez-Jiménez, D., & Sanz-Valle, R. (2016). Studying the links between organizational culture, innovation, and performance in spanish companies. Revista Latinoamericana de Psicologia, 48(1), 30–41. https://doi.org/10.1016/j.rlp.2015.09.009
Novatiani, R. A., Afiah, N. N., & Sumantri, R. (2022). Risk management and other factors preventing fraudulent financial reporting by state-owned enterprises in indonesia. Asian Economic and Financial Review, 12(8), 686–711. https://doi.org/10.55493/5002.v12i8.4587
Olayinka, A. E., Uwuigbe, U., Sylvester, E., Uwuigbe, O. R., & Amiolemen, O. O. (2019). Does enterprise risk management impact accounting quality? evidence from the nigerian financial institutions. Investment Management and Financial Innovations, 16(4), 16–27. https://doi.org/10.21511/imfi.16(4).2019.02
Phan, T. D., Dang, T. H., Nguyen, T. D. T., Ngo, T. T. N., & Hoang, T. H. Le. (2020). The effect of enterprise risk management on firm value: evidence from vietnam industry listed enterprises. Growing Science : Accounting, 6(4), 473–480. https://doi.org/10.5267/j.ac.2020.4.0011
Phornlaphatrachakorn, K., & Kalasindhu, K. N. (2021). Digital accounting, financial reporting quality and digital transformation: evidence from thai listed firms. Journal of Asian Finance, Economics and Business, 8(8), 409–419. https://doi.org/10.13106/jafeb.2021.vol8.no8.0409
Porcel, V. C., Belmonte, M. P. C., & Uriarte, M. M. C. (2024). Delving into sustainability reporting literature: the role of ethics. In Equilibrium. Quarterly Journal of Economics and Economic Policy (Vol. 19, Issue 1). https://doi.org/10.24136/eq.2941
Qirem, I. A. El, Alshehadeh, A. R., Al-Khawaja, H. A., Elrefae, G. A., Jebril, I., & Alshehade, S. A. (2023). The impact of sustainability accounting on financial reporting quality: evidence from the pharmaceutical and chemical sectors on the ase. Journal of Logistics, Informatics and Service Science, 10(4), 62–71. https://doi.org/10.33168/JLISS.2023.0405
Quang, L. V., Ngoc-Long, N., & Giang, P. X. (2024). Enterprise risk management and firm performance: exploring the roles of knowledge, technology, and supply chain. Problems and Perspectives in Management, 22(2), 150–164. https://doi.org/10.21511/ppm.22(2).2024.13
Radu, O. M., Dragomir, V. D., & Hao, N. (2023). Company-level factors of non-financial reporting quality under a mandatory regime: a systematic review of empirical evidence in the european union. Sustainability, 15(23), 1–32. https://doi.org/10.3390/su152316265
Rahman, M. J., Kennedyd, S. I., & Chen, Z. (2022). Enterprise risk management and company’s performance: empirical evidence from china. Journal of Accounting, Business and Management (JABM), 29(1), 107–119.
Rajabalizadeh, J. (2024). Corporate culture’s influence on the transparency of financial reporting in iran: an in-depth analysis of readability and tone. Journal of Applied Accounting Research, 1–39. https://doi.org/10.1108/JAAR-02-2024-0074
Respati, A., Rangga, & Ika, A. (2024). Banyak masalah, masih akan ada bpr ambruk tahun ini. Kompas.Com.
Sebrina, N., Taqwa, S., Afriyenti, M., & Septiari, D. (2023). Analysis of sustainability reporting quality and corporate social responsibility on companies listed on the indonesia stock exchange. Cogent Business and Management, 10(1), 1–28. https://doi.org/10.1080/23311975.2022.2157975
Setyaningsih, S., Widjojo, R., & Kelle, P. (2024). Challenges and opportunities in sustainability reporting: a focus on small and medium enterprises (smes). Cogent Business and Management, 11(1), 1–17. https://doi.org/10.1080/23311975.2023.2298215
Simpson, A., & Tamayo, A. (2020). Real effects of financial reporting and disclosure on innovation. Accounting and Business Research, 50(5), 401–421. https://doi.org/10.1080/00014788.2020.1770926
Siswanti, Y., & Nurhariati, E. (2022). The influence of organizational culture to innovation behavior: a hierarchical linear modelling approach. Journal of International Conference Proceedings, 5(5), 267–284. https://doi.org/10.32535/jicp.v5i5.2087
Soliman, A. M., Mukhtar, A., & Shubita, M. F. (2018). The long-term relationship between enterprise risk management and bank performance: the missing link in nigeria. Banks and Bank Systems, 13(1), 128–138. https://doi.org/10.21511/bbs.13(1).2018.12
Thomya, W., & Saenchaiyathon, K. (2015). The effects of organizational culture and enterprise risk management on organizational performance: a conceptual framework. International Business Management, 9(2), 158–163. https://doi.org/10.3923/ibm.2015.158.163
Utami, W., Setiany, E., Hidayah, N., & Azhar, Z. (2024). Sustainability reporting quality and corporate value: indonesia and malaysia context. Journal of Law and Sustainable Development, 12(1), 1–21. https://doi.org/10.55908/sdgs.v12i1.2239
Viscelli, T. R., Beasley, M. S., & Hermanson, D. R. (2016). Research insights about risk governance: implications from a review of erm research. SAGE Open, 6(4), 1–17. https://doi.org/10.1177/2158244016680230
Wang, J.-H., Dai, X., Wu, Y.-H., & Chen, H. L. (2024). Innovation strategies and financial performance: a resource dependence perspective for fintech management decision-making. Journal of Organizational Change Management, 37(7), 1510–1534. https://doi.org/10.1108/JOCM-03-2023-0054
Wijethilake, C., Upadhaya, B., & Lama, T. (2023). The role of organisational culture in organisational change towards sustainability: evidence from the garment manufacturing industry. Production Planning and Control The Management of Operations, 34(3), 275–294. https://doi.org/10.1080/09537287.2021.1913524
Winarto, A. J., & Chariri, A. (2022). The effect of enterprise risk management and firm financial performance: empirical study on manufacturing companies listed on the indonesia stock exchange. Diponegoro Journal of Accounting, 11(4), 1–15.
Yang, S., Ishtiaq, M., & Anwar, M. (2018). Enterprise risk management practices and firm performance, the mediating role of competitive advantage and the moderating role of financial literacy. Journal of Risk and Financial Management, 11(3), 1–17. https://doi.org/10.3390/jrfm11030035
Yuwono, W., Fitriyanti, S. D., & Nainggolan, F. (2025). Impact of Digital Marketing Innovation and Strategic Orientation on Firm Performance: Mediation by Marketing Capability and Moderation by Risk Management. Revista de Métodos Cuantitativos Para La Economía y La Empresa, 39, 1–19. https://doi.org/10.46661/rev.metodoscuant.econ.empresa.10841
Zadorozhnyi, Z.-M., Ometsinska, I., & Muravskyi, V. (2021). Determinants of firm’s innovation: increasing the transparency of financial statements. Marketing and Management of Innovations, 5(2), 74–86. https://doi.org/10.21272/mmi.2021.2-06
Zeb, A., Akbar, F., Hussain, K., Safi, A., Rabnawaz, M., & Zeb, F. (2021). The competing value framework model of organizational culture, innovation and performance. Business Process Management Journal, 27(2), 658–683. https://doi.org/10.1108/BPMJ-11-2019-0464
Zhang, W., Zeng, X., Liang, H., Xue, Y., & Cao, X. (2023). Understanding how organizational culture affects innovation performance: a management context perspective. Sustainability, 15(8), 1–18. https://doi.org/10.3390/su15086644
Zhen, Z., Yousaf, Z., Radulescu, M., & Yasir, M. (2021). Nexus of digital organizational culture, capabilities, organizational readiness, and innovation: investigation of smes operating in the digital economy. Sustainability (Switzerland), 13(2), 1–15. https://doi.org/10.3390/su13020720
Copyright (c) 2025 Angelin Angelin, Wisnu Yuwono, Yulfiswandi Yulfiswandi
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
