This research investigates the relationship between corporate governance (CG) mechanisms and SSB mechanisms on the firm's performance of Islamic bank affected by the mediating variable of CG disclosure. CG is expected to be relevant to Islamic banks in strengthening the infrastructure of Islamic financial institutions (IFIs). Thought a limited amount of research against on CG and performance of Islamic banks has been carried out, this study tries to explore more on the CG and firm performance, particularly in the context of Islamic banks and CG disclosure as a mediating variable to strengthen this relationship. This paper aims to address CG disclosure as a mediating variable as a gap in this study. The empirical procedures involve panel data analysis is applied from the annual reports of Islamic banks in the Southeast Asian (SEA) and the Gulf Cooperation Council (GCC) regions from 2012 to 2017. Based on the reviews past literature, the result provides evidence that stronger CG strength and Shari'ah supervisory board (SSB) strength have a relationship with a higher level of firm performance of the Islamic bank. This study contributes to the literature regarding how CG disclosure as a mediating variable influences the relationship between CG strength, SSB strength and firm performance of Islamic banks.

Purpose This paper aims to determine the role governance plays in the voluntary adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Disclosure Standards by Islamic insurance (takaful) operators in the Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions. Design/methodology/approach This study uses a sample of 44 takaful operators in the SEA and the GCC regions. While corporate governance (CG) strength is measured by the use of the frequently examined variables of the board of directors and audit committee, Shari’ah governance strength is measured by the characteristics of the Shari’ah Supervisory Board (SSB). Content analysis is used to extract disclosure items from the 2014 annual reports. Agency theory, stakeholder theory and political economy theory are argued to support the hypotheses. Findings The results show that CG strength has a positive and significant effect on the voluntary adoption of AAOIFI Disclosure Standards by takaful operators, indicating that CG plays an important role in the disclosure of information in the annual reports of takaful operators. However, the results show a lack of association between SSB strength and voluntary adoption of AAOIFI Disclosure Standards. Our results suggest that the SSBs may not be as involved as the other CG mechanisms (such as a board of directors and audit committees) in reviewing financial reports. On another note, the level of the political right and civil liberties has a negative and significant effect on the voluntary adoption of AAOIFI Disclosure Standards, providing an indication that stakeholders in a community with greater freedom tend to be more active in pressuring takaful operators to provide more information to justify their existence in the community. Similar to SSB strength, the legal system is also found to have no significant association with the voluntary adoption of the AAOIFI disclosure standards. Practical implications This study provides stakeholders with a tool to evaluate the effectiveness of the governance role in increasing the transparency of takaful operators by examining the governance factors using a self-constructed disclosure index. Originality/value Our study is among the first to provide an in-depth analysis of voluntary adoption of AAOIFI Disclosure Standards for takaful operators in these two regions; therefore, this study has implications for regulators and standard setters. The findings of this study are expected to provide information to regulators and standard setters on the role of governance in improving the transparency of takaful operators.

To fulfil the Maqasid Shari’ah of Islamic banks in promoting the welfare of society, Islamic banks are expected to consciously align their performance measurement according to the principles of Islamic banks that are derived from Islamic economic philosophy. In the meantime, in light of the agenda of Sustainable Development Goals (SDG) 2030, the principle of environment, social and governance (ESG) has become part of the sustainability reporting and become a central concern of the investors. The tenets of ESG and Islamic finance basically intersect and share similar principles of responsibility, accountability, and stewardship in providing protection and benefits to the environment and humankind as a whole which is in line with the principle of Maslahah in the Maqasid Shari’ah. Hence, there is ample room for the ESG element to be harmonized with the Maqasid Shari’ah elements in a holistic performance measurement index of Islamic banks. Therefore, the performance of Islamic banks can be measured in a more holistic approach by combining financial and non-financial performance with the ultimate objective of Islamic banks being sought as the primary reference, and the sustainability issue can be well addressed. This paper reviews the previous literature on the performance of Islamic banks, ESG principles in the context of Islamic banks and the Maqasid Shari’ah performance index that has been developed by previous researchers. Fulfilling Maqasid Shari’ah and sustainability agenda in the performance measurement index would further strengthen the performance of Islamic banks in the effort to maintain Malaysia as the leader in the regional and world Islamic financial hub.