Purpose The significant growth of takaful companies warrants closer scrutiny of their governance structures, including disclosure practices. However, prior research documents considerable variation in their corporate governance disclosures (CGD). Despite this, the existing focus is more on descriptive assessments, with limited attention to the underlying determinants that shape such variation. In particular, little is known about how managerial discretion influences CGD in takaful settings. This study responds to the growing call for research on governance and sustainability in the Asia–Pacific by assessing the extent of adherence among Islamic financial institutions (IFIs), specifically takaful companies, to the internationally recognised standards and guidelines on governance and disclosure. The study also examines the influence of managerial discretion forces on the extent of CGD and the moderating role of corporate governance structure on the relationship. Design/methodology/approach The authors created a comprehensive CGD index based on the guidelines issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the Islamic Financial Services Board (IFSB) and the Organisation for Economic Co-operation and Development (OECD). The study focuses on three forces to determine the extent of managerial discretion: internal organisational factors (i.e. firm profitability and resource availability), managerial characteristics (i.e. Chief Executive Officer (CEO) tenure and experience) and the task environment (i.e. uncertainty avoidance (UA) and rule of law). This study used ordinary least squares (OLS) regression with robust standard errors clustered by firm and tested the research hypotheses using a sample of 48 takaful companies in South East Asia (SEA) and the Gulf Cooperation Council (GCC) from 2018 to 2022. Findings Despite various guidelines, there are still discrepancies and significant variations in the extent of CGD, with takaful companies in the GCC marginally outperforming their counterparts in the SEA region. The findings also indicate that the managerial discretion hypothesis, as measured by internal organisational factors and managerial characteristics, could explain the variation in the level of CGD. Specifically, firm profitability and CEO experience are significantly and positively associated with the CGD. On the other hand, resource availability and CEO tenure are significantly and negatively associated with the CGD. Furthermore, the findings indicate that BOD size significantly moderates the relationship between CEO tenure and the rule of law with the level of CGD in takaful companies. Practical implications The findings provide important empirical insights into how variations in CGD can influence broader sustainability outcomes in takaful companies and support ongoing efforts to strengthen governance and sustainability practices across the Asia–Pacific region. Higher levels of CGD enhance transparency and accountability, which are essential for building stakeholder trust and supporting the long-term sustainability of IFIs. Conversely, weak disclosure may undermine confidence and limit the effectiveness of governance frameworks. By highlighting regional disparities and identifying where governance disclosure lags, the study helps pinpoint areas where regulatory oversight and enforcement can be strengthened. In this regard, policymakers and regulators may consider refining disclosure guidelines to ensure greater consistency and alignment with sustainability objectives. At the firm level, this study also offers practical recommendations on balancing managerial discretion with the need for transparency, accountability and business sustainability. The internal controls and governance frameworks should be designed to optimise disclosure practices while allowing managers the necessary flexibility to make strategic decisions. Social implications This study highlights circumstances in which managers may act unethically, as evidenced by declining CGD levels. The ethical standards in corporate disclosure should be enhanced to promote corporate social accountability and transparency. Strengthening CGD can also contribute to more responsible organisational behaviour and improved stakeholder engagement, both of which are central to the broader sustainability goals of the Islamic finance sector. Originality/value This paper is believed to be among the first to explore the influence of managerial discretion forces, namely internal organisational factors, managerial characteristics and task environment, on CGD in takaful companies.
Hasan et al. (Thu,) studied this question.