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Purpose This paper aims to investigate the impact of corporate governance practices on cost efficiency and financial stability for a sample of Islamic and conventional banks. In the analysis, the author uses a set of corporate governance variables that include, the board size, board independence, director gender, board meetings, board attendance, board committees, chair independence and CEO characteristics. Design/methodology/approach The author uses corporate governance data of Islamic banks that is unique in this field. In the analysis, the author also uses stochastic frontier analysis and panel vector autoregression models to quantify long-run and short-run statistical relationships between the operational efficiency of Islamic Banks and corporate governance practices. Findings According to the results, Islamic and conventional banks exhibit important differences in the effects of corporate governance practices on cost efficiency and financial stability. Results show that with a blind general adoption of corporate governance practices, Islamic banks may suffer a loss in their value since the adoption of the third layer of binding practices, over and above the already existing ones, imposed by the Sharia Board and the Board of Directors, may lead to cumbersome business operations. This conclusion is of importance to Islamic Banks since they struggle to survive in a very competitive international environment. Practical implications The author believes that the results may be of a certain value to regulators, policymakers and managers of Islamic banks. Based on the results, the author postulate that Islamic banks should select carefully international corporate governance practices. Social implications Islamic banks should not adopt additional third layer of binding practices as that would result lower performance and instability that would be damaging for the economy Originality/value This study employs a unique sample of Islamic banks that includes corporate governance data hand collected. Our findings of the corporate governance impact on Islamic banks performance and stability are therefore unique in the literature.

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We provide a novel panel model to decompose total factor productivity (TFP) growth in the Greek industry at the firm level while we tackle the contribution of R&D. We, therefore, opt for parametric methodology that provides statistical inference and would validate the results. Our modeling departs from prior strong assumptions such as error terms across firms being independent. In fact, we provide a novel limited information maximum likelihood (LIML) estimation method that adequately deals with the issue of endogeneity and model misspecification. We demonstrate that our model detects variability in terms of TFP growth components across industries and firms. Our results show that R&D would enhance TFP of Greek firms, albeit the crisis has had a detrimental impact. Financial ratios such as liquidity and solvency ratios also affect TFP as we demonstrate that both would enhance TFP. The solvency ratio is important as it provides an estimate of whether the firm can cope with debt. We also note variability across small versus medium and large firms and report that small firms are more productive and spend more of their revenues on R&D. In terms of policy, our evidence warrants higher R&D spending to enhance TFP growth, though R&D funding is a concern.