Audit committee attributes and Islamic bank risk-taking behavior

Abstract

Purpose This study aims to investigate the relationship between audit committee (AC) attributes and the risk-taking behavior of Islamic banks. Design/methodology/approach The study used data generated from the annual reports of 43 full-fledged Islamic banks operating in 15 countries between 2010 and 2020. Findings The findings indicate that AC size, AC independence and the proportion of AC members from foreign countries have a significant negative relationship with the risk-taking of Islamic banks. However, AC meetings, AC gender diversity and the proportion of AC members with doctorate degrees have insignificantly influenced the risk-taking of Islamic banks. Research limitations/implications The study used only six AC attributes out of corporate governance mechanisms likely to affect the insolvency risk of full-fledged Islamic banks between 2010 and 2020. Practical implications The study sheds light on the effects of AC attributes on the risk-taking of Islamic banks. The findings could allow policymakers and regulators to provide policies and regulations that could improve AC’s oversight role in constraining Islamic banks from excessive risk-taking. Besides, this study can guide the board of directors in appointing AC members who can prevent Islamic banks from taking excessive risks. Originality/value This study provides clear and adequate empirical evidence showing how key audit committee attributes influence the risk-taking behavior of full-fledged Islamic banks.

Analisis Faktor-Faktor Kinerja Keuangan Terhadap Profitabilitas: Studi Kasus Perbankan Syari’ah di Indonesia Tahun 2020-2022

“…Pengukuran secara internal dapat menjadi bahan evaluasi perbankan syar'ah dalam menjaga performa perusahaan di masyarakat sehingga keuntungan yang diperoleh mengalami kenaikan (Jan et al, 2023). Upaya pencegahan terhadap risiko yang diterima pada hasil kinerja keuangan dapat menjadi bahan evaluasi internal dalam mengambil sebuah keputusan (Umar et al, 2023). Dengan mengetahui faktor-faktor tersebut dapat berdampak pada keuntungan yang diperoleh oleh bank syari'ah.…”

Revisiting the relationship between corporate governance mechanisms and ESG disclosures in Saudi Arabia

“…Besides, the GMM model is appropriate because the sample size is greater than the number of years. The models for estimating the effects of the corporate governance attributes on ESG disclosure and its components' reporting are as follows: ) is to account for the dynamic relationship and resolve the issue of potential endogeneity in the models (see Blundell and Bond, 1998;Al-Faryan, 2021;Umar et al, 2023).…”

“…For instance, the existence of independent directors that guard the firm against socially unacceptable behaviors is more likely to stop managers from acting in their self-interest (Disli et al , 2022). Independent directors are objective and impartial in carrying out their duties to legitimize the company’s operations and protect stakeholders’ interests (Umar et al , 2023). The agency theory argues that independent directors on the board are expected to reduce information asymmetry (Fahad and Rahman, 2020).…”

“…Weak or ineffective corporate governance practices would not only become a stumbling block to achieving the visions and targets but also the sustainable operations of firms in the kingdom. It is worth noting that the great financial crisis of 2007–2008 occurred due to the weaknesses of corporate governance practices (Umar et al , 2023). Hence, examining how corporate governance mechanisms affect ESG reporting in Saudi Arabia is very profound, as the findings could guide regulators in taking necessary measures to revitalize the corporate governance practices in such a way as to boost ESG activities and reporting in the country.…”

Banking Regulation and Financial Soundness Nexus in View of the Crisis: An Islamic Banking Perspective

“…The standard on the supervisory review process, known as IFSB-5 (2007), recommends that supervisors should ensure that appropriate systems are in place, including SB. In addition, another current of literature has investigated Islamic banking under different aspects, such as financial stability (Abedifar et al, 2013;Beck et al, 2013;Čihák and Hesse, 2010;Daoud and Kammoun, 2020b;Othman et al, 2023), supervisory and regulatory issues (Nastiti and Kasri, 2019;Smaoui and Ghouma, 2020;Daoud and Kammoun, 2022), and corporate social responsibility (Hanic and Smolo, 2023;Jusoh and Ibrahim, 2017), expanding the debate on Islamic banking by focusing on the risk characteristics of the Islamic banking system (Aydemir et al, 2023;Mateev and Nasr, 2023;Umar et al, 2023). The Islamic banking sector has also benefited from relative advancements in terms of technological innovations and supporting infrastructure and regulation (Alshater et al, 2022).…”