Governance, Location, Size and Waqf Efficiency in Malaysia

Abstract

This study examines the relationship between corporate governance mechanisms, location, and size of organization with the efficiency of thirteen State Islamic Religious Councils (SIRCs) in managing waqf in Malaysia for the period 2007 to 2013. The measurement of the technical efficiency of the SIRCs uses two basic models of Data Envelopment Analysis (DEA). For the purpose of measuring the efficiency, this study uses three inputs and two outputs selected based on the intermediation approach. Based on efficiency scores, further investigation is made into the factors that are influential to the efficiency level of the SIRCs by evaluating the relationship between location, size of organization and governance mechanisms as measured by board size, board independence and board meeting against efficiency by using the panel data analysis. The findings show only one SIRC is fully efficient and the other twelve SIRCs are inefficient when analysis is done on a full sample of the thirteen SIRCs. Further analysis on the technical efficiency components also reveals that the SIRCs inefficiency mostly caused by managerial inefficiency, not scale inefficiency. Finally, the findings reveal that there is a significant relationship between all efficiency scores with location and the board size signifying that the SIRC Penang almost achieve full efficiency in their management of the waqf. Meanwhile, size of organization and board independence are significant with scale efficiency and pure technical efficiency respectively showing that large size organization are more efficient in their production process and the more outsiders in the board of directors, the less efficient is the SIRCs.

The Measuring Efficiency of Waqf Fund

“…Hasan & Ahmad (2014) measure the efficiency of waqf by measuring two stages, namely the collection stage and the distribution stage using Data Envelopment Analysis (DEA). (Ibrahim & Ibrahim, 2020) This study examines the relationship between corporate governance mechanisms, location, and organizational size with the efficiency of SIRCs in waqf management in Malaysia for the period 2007 to 2013 using two basic Data Envelopment Analysis (DEA) models. Hasan, Azmi, Mud, & Ahmad (2020) measure efficiency scores in the two states of Kelantan and Penang that manage SIRCs Waqf funds using Data Envelopment Analysis (DEA) for 2008 to 2010.…”