NATIONAL CULTURE AND TRANSPARENCY: EVIDENCE FROM ISLAMIC BANKS

: The purpose of this paper is to investigate the effects of predominant cultural values on banking disclosure. On one hand, Islamic banks have practiced Islamic principles which are universal for all countries. Islamic banks are expected to provide transparent information especially in terms of social and Shariah(Islamic) compliant information as Islamic banks claim themselves to have social objectives as the prime consideration. Islamic banks also have Shariah supervisory body to ensure that the banking activities and business operations are in line with Islamic requirements. On the other hand, Hofstede‘s cultural dimensions and Gray‘s hypotheses have rendered remarkable contributions in financial and accounting practices among different nations. Examining 45 Islamic banks in 11 Moslem majority countries, this paper focuses on four particular cultural dimensions namely individualism/collectivism, masculinity/femininity, uncertainty avoidance, and power distance and whether these dimensions have an impact on transparency. This study found that two out of four national cultures still have significant effect on the transparency level in Moslem majority countries.


INTRODUCTION
Each accounting system is a product of its specific culture and environment (Askary, Pounder, azdifar, 2008). The nature of accounting as social science makes it inseparable from environmental influence, social values, culture and also religion. Gray's paper in 1988 was a pioneering paper contributing the idea that culture might affect accounting practice (Chanchani and Willett, 2004). Gray proposed some hypotheses derived from Hofstede's societal values (Chanchani and Willett, 2004;Hofstede, 1991). Gray came up with four significant accounting value dimensions derived from accounting literature were offered, encompassing professionalism versus statutory control, uniformity versus flexibility, conservatism versus optimism, and secrecy versus transparency (Gray, 1988). Integrated with Hofstede's societal values, these accounting dimensions have been used to propose cultural areas categorizing the countries which can be grouped into areas on the basis of cultural characteristics. However, this study focuses on one accounting value dimension which is transparency. As Gray(1988) hypothesized that a country with higher uncertainty avoidance and power distance and lower level of individualism and masculinity tends to have higher level of secrecy. The paper proceeds as follows. The first section provides literature on Hofstede's cultural dimensions being widely used in cross-cultural studies in accounting. This section then goes on to explore Gray's first work. The next section provides insight into profit sharing system. The next section explains the hypothesis of the study. The following section discusses the research methodology followed by analysis and discussion. The last section concludes the study.

LITERATURE REVIEW Hofstede's Cultural Dimensions and Gray's hypotheses
Culture is often defined as a system of shared attitudes, values, and beliefs that characterizes individual or group perceptions, preferences, and behaviours (Anderson, Fedenia, Hirschey, Skiba, 2011) and influences all aspects of a society's and an individual's life (Gaygisiz, 2013). The impact of culture on has been carried out in many different studies. Studying the cultural impacts on accounting has become popular since Gray initiated his work in the late 1980s. He offered a contribution towards a theory of cultural influence on the development of accounting systems internationally. Gray Orientation versus Short Term Normative Orientation and Indulgence versus Restrain. Power distance can therefore be defined as the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally (Hofstede, 1991). As such, high power distance societies accept the unequal distribution of power and authority (Boubakri, Mirzaei, Samet, 2017). Hofstede defines individualism as a dimension pertaining to societies in which the ties between individuals are loose; everyone is expected to look after himself or herself and his or her immediate family. Uncertainty avoidance is defined as the extent to which the members of a culture feel threatened by uncertain or unknown situation (Boubakri et al., 2017;Laitinen and Suvas, 2016). In countries with strong uncertainty avoidance there tend to be more and more precise rules and laws than in those with weak uncertainty avoidance in which in a condition when rules and laws cannot be respected, they should be changed.
Gray's work in 1988 was a pioneering paper contributing the idea that culture might affect accounting practice (Chanchani and Willett, 2004 Gray, 1983). However, this study mainly examine one out of four Gray's hypotheses stating that a country with higher uncertainty avoidance and power distance and lower level of individualism and masculinity tends to have higher level of secrecy.

Transparency through Islamic Banking Disclosure
Corporate disclosures relates to social and moral values. It can be said that this service is more related to Islamic banks (Abbasi et al., 2012). Islamic banks have the objective to uphold ethical financial system (Asutay and Harningtyas, 2015) with the final objective to promote the prosperity (Bukhari, Awan, Ahmed, 2013) both economic and social welfare (Dusuki, 2008). Islamic banks must also ensure the conformance with Shariah principles and requirements. Having more social responsibilities, Islamic banks are expected to involve more social activities. Islamic banks have the responsibility in terms of charity and Islamic charity called zakah and qard (Maali, Casson, Napier, 2006;Nobanee and Ellili, 2016). Therefore, Islamic banks should have broader and more comprehensive disclosure (Haniffa and Hudaib, 2007).

HYPOTHESIS
This study aims to test one of Gray's hypotheses stating that a country with higher uncertainty avoidance and power distance and lower level of individualism and masculinity tends to have higher level of secrecy. However, Islamic banks have to disclose the similar information on zakah (obligatory charity), qardhhassan(benevolence loans), charity, other social activities in the annual reports (Ali and Hasan Therefore, this study hypothesizes that uncertainty avoidance, power distance, individualism and masculinity do not have impact on transparency level (disclosure).
Ho: There is no significant impact of cultural differences (uncertainty avoidance, power distance, individualism and masculinity) on transparency level (disclosure) in Islamic banks in different countries.
Ha: There is asignificant impact of cultural differences (uncertainty avoidance, power distance, individualism and masculinity) on transparency level (disclosure) in Islamic banks in different countries.

RESEARCH METHODOLOGY
This is a quantitative research because its objective is to empirically examine the relationship and causality of several variables. The purpose of quantitative research is to test the hypotheses or make some predictions (Cooper and Schindler, 2011). This study examines the latest 45 Islamic banks' annual reports in eleven countries year of 2015. Numerous studies have utilized the published annual reports which are considered as the main source of information for the stakeholders (Lu and Abeysekera, 2014;Soana, 2011). The data will be analysed using regression.

ANALYSIS AND DISCUSSION
This section discusses the data analysis and the results. The assumption of normality is measured by Skewness and Kurtosis. The value of Skewness and Kurtosis should range between +1 to -3. The value of Skewness and Kurtosis close to zero indicates that the distribution is symmetric (Cooper and Schindler, 2011 Table 4 The Significance of the Model The table above reveals that the model represents banking transparency through Shariah and social disclosure. The model is statistically significant at 1% significance level.

Table 5 Coefficients
This study refers to Gray's hypothesis that a country with higher uncertainty avoidance and power distance and lower level of individualism and masculinity tends to have higher level of secrecy. The model reveals that only Individualism and Masculinity affect the disclosure practices. Other two cultural values namely Uncertainty Avoidance and Power Distance do not statistically influence the transparency level. The null hypothesis of this study states that there is no significant impact of cultural differences (uncertainty avoidance, power distance, individualism and masculinity) on transparency level (disclosure) in Islamic banks in different countries. The null hypothesis is partially accepted.
Other variables such as Moslem Population and the Shariah supervisory board do not have a significant effect of the disclosure practices in Islamic banks. This is due to all Islamic banks Shariah supervisory boards (Hashim, Mahadi, Amran, 2015; Rashid and Jabeen, 2016) and the board size is similar among Islamic banks. The bigger number of Moslems in a country is assumed to expect more transparent information. However, Moslem population does not have significant impact because all the countries examined are Moslem majority Countries having slightly same percentage of Moslem population.

CONCLUSION
Many studies have proven that cultural dimensions have a prevailing influence on human behaviours in some aspects including accounting and financial practices. Hofstede introduced cultural dimensions which became the reference of Gray's hypotheses on accounting value dimensions. This study attempts to examine one of Gray's hypotheses relating to transparency. Having the universal values and principles, Islamic banks are expected to provide the information (the same level of transparency). It is because religious values should surpass the cultural differences. This study finds that two out of four national cultures still have significant effect on the transparency level in Moslem majority countries.