CEO hubris and Islamic banks’ performance: Investigating the roles of Sharia board vigilance and CEO power

Abstract

The purpose of the study is to thoroughly outline how the hubris behavior of chief executive officers (CEO) is detrimental to Islamic banks’ (IBs) performance. Specifically, this study attempts to examine the role of the Sharia supervisory board (SSB), board vigilance, and CEO power in the relationship between CEO hubris behavior and decreased IBs’ performance. This study observes IBs’ performance during the period from 2014 to 2020 and develops eight models to test their determinants. Empirical testing of all models shows that CEO hubris has a detrimental impact on IBs’ performance. The moderating impact test shows the following results: firstly, the presence of SSB, which is represented by the reputation of its members, reduces the detrimental impact of hubris behavior by CEOs on IBs’ performance, while that impact, which is represented by member expertise, does not have a moderating effect. Second, the size and independence of the BOC both weaken the negative relationship between CEO hubris and IBs’ performance. Third, CEO power as represented by tenure and ownership has no moderating effect.

CEO Power and Environmental, Social, Governance (ESG): A Systematic Review

“…Al-Shaer and Zaman (2016) develop and monitor management behavior in order to detect any opportunistic activities (Husted & Filho, 2019). According to Zulfikar et al (2021), boards with a higher proportion of female directors put pressure on CEOs to engage in environmentally friendly activities that increase long-term business value. According to Zulfikar et al (2021), when there are more female directors on the board, newly appointed CEOs are more likely to introduce new environmental measures to improve performance.…”

“…According to Zulfikar et al (2021), boards with a higher proportion of female directors put pressure on CEOs to engage in environmentally friendly activities that increase long-term business value. According to Zulfikar et al (2021), when there are more female directors on the board, newly appointed CEOs are more likely to introduce new environmental measures to improve performance. According to Ge et al (2022), ESG performance is vital.…”

“…As the CEO's power develops, so does this link. Furthermore, Zulfikar et al (2021) observed that freshly appointed CEOs were more interested in environmental efforts, probably to alleviate their career worries early in their tenure, but CEOs with managerial authority were less involved in environmental projects owing to the accompanying expenditures. According to Haque (2017), CEOs must now understand their responsibilities to minimize the company's carbon footprint and cut water and paper usage, which are socially accountable to all internal and external stakeholders.…”

“…According to Zulfikar et al (2021), a CEO's legal management authority is substantially inversely related to environmental performance, meaning that CEOs with greater power and tenure are less adaptable. They may not emphasize the creation of new environmental initiatives, but Chen et al (2019) believe that newly appointed CEOs use their involvement in environmental businesses as a signal to alleviate early career concerns.…”

“…Furthermore, the motivation for enacting acceptable social and environmental policies may be opportunistic, since this will benefit the CEO's image and reputation (Li et al, 2018). According to Zulfikar et al (2021), a strong CEO is more likely to pursue "pet" activities to promote their public image as environmental stewards, regardless of the impact on shareholder profits. Negative outcome.…”