Shari’ahsupervisory board characteristics effects on Islamic banks’ performance

Abstract

Purpose: Islamic banks (IBs) must stay Shari'ah compliant to enhance their customer loyalty and obtain a competitive edge. Given the performance of Shari'ah supervisory board (SSB) continues to be a matter of concern especially for IBs across countries that have a different regulatory environment, the purpose of this paper is to examine the effects of SSB characteristics on IBs' performance in Malaysia being a country that applies the most extreme intervention of regulatory agencies (pro-active model). Design/methodology/approach: A sample of 15 Malaysian IBs is used to test the study hypotheses for the period from 2008 to 2015 using the Generalized Method of Moments estimator.Findings: The results reveal strong support for a significant association between SSB size, doctoral qualification, change in the SSB composition and performance. In addition, the study supports the view that SSB with crossmembership and reputation is very important in improving the performance of IBs. Research limitations/implications: First, the paper focused only on Malaysia which adopts a pro-active model, and therefore, extending the investigation to include countries that adopt the different models may provide a better view of the best Shari'ah governance (SG) practices for IBs. Second, there is a need for more empirical analysis regarding the optimal SSB size of IBs. Practical implications: This paper provides empirical evidence for regulators and policy makers in Malaysia, to understand how to enhance the performance of IBs using SG. Furthermore, marketers of Malaysian IBs should focus on SG practices as an important element for attracting Muslim customers, especially as there is a lack in this aspect. Originality/value: To date, it seems there is no empirical study that has examined to what extent the impact of SSB characteristics on IBs performance can be affected by the degree of agencies intervention, whether extreme or slight. Malaysia has been chosen as the only country that adopts the most extreme model.

Determinants of the Intention of Muzakki to Pay Professional Zakat

“…The religiosity variable is measured by indicators regarding religious awareness, obligations of fellow humans, the concept of income, and the concept of humans having a relationship with God ( Aisyah, 2014;Mokhlis, 2009). The trust variable is measured using indicators regarding the trust of muzakki about information, compliance with Sharia, and the reputation of the supervisory board (Nomran, Haron, & Hassan, 2018).…”

Board Size, Chief Risk Officer and Risk-taking in Islamic Banks: Role of Shariah Supervisory Board

“…The mean values of the Z score, the ratio of NPL, and the ratio of loan loss provision indicate that the IBs in the three SEA countries have relatively low impaired loans, and are thus considered financially healthy. The average size of SSB is 4 with a range between 2 and 9 scholars as opposed to the mean of 3 scholars, as found in Nomran et al (2018). As for the expertise, on average, about 95% of SSB members have experience Jurnal Pengurusan 57(2019), Galley Proof ISSN 0127-2713 and MyCite Indexes in banking and financial services.…”

“…Other than investigating the main effect, this study also looks at the integration of AT and RDT to explain the moderating effect of SSB attributes on the link between large board size, CROs who serve as executive board members and risk-taking of IBs. The choice of the research variables are based on the relevant albeit limited prior literature on the corporate governance of IBs such as Mollah and Zaman (2015), Mollah et al (2017), Nomran, Haron and Hassan (2017) and Nomran, Haron and Hassan (2018). Figure 1 depicts the research framework of this study.…”

“…SSB member experience in banking and finance is measured om terms of the percentage of SSB members with relevant experience. It is computed by dividing the number of SSB members with experience in banking and finance with the total number of SSB scholars in the SSB (Amanullah 2015;Nomran et al 2018). Next, SSB member experience in Shariah supervision is measured in terms of the percentage of SSB members that have such experience.…”

“…Next, SSB member experience in Shariah supervision is measured in terms of the percentage of SSB members that have such experience. This is calculated by dividing the number of SSB members with experience in Shariah supervision with the total number of SSB scholars in the SSBs (Amanullah 2015;Nomran et al 2018). Finally, the appointment of a CRO as an executive board member is measured by a dummy variable of 1 if the CRO is an executive member and 0, otherwise (Aebi et al 2012;Amoozegar, Pukthuanthong & Walker 2017).…”