Is the Sharia supervisory board a friend or an enemy of Islamic banks?

Abstract

Purpose This paper is an empirical study of the effect of the characteristics of the Sharia supervisory board (SSB) on the financial performance of Islamic banks. Design/methodology/approach Using 42 Middle East and North Africa (MENA) Islamic banks outside the Gulf Cooperation Council (GCC) and non-Islamic countries during the 2011/2018 period, a random-effects generalized lease square method for the regression analyzes is applied. Findings The obtained results show that the characteristics of the SSB affect the financial performance of Islamic banks. The results also affirm that a large-sized board of directors and the number of SSB meetings improve banking performance while the cross-mandate seems to destroy it. On the other hand, the SSB members’ competence and reputation and the proportion of women sitting in SSB have no impact on the financial performance of Islamic banks. Research limitations/implications This paper gives a comprehensive literature survey on the effect of the characteristics of the SSB on the financial performance of Islamic banks. Practical implications This study offers insights into the practitioner and Islamic banking regulators interested in enhancing the legitimacy of corporate governance in Islamic financial institutions. Originality/value This paper is among the few studies that investigate the effect of the characteristics of SSB on the financial performance of Islamic banks in particular in Islamic banks in the MENA region outside the GCC and in non-Islamic countries.

Social Awareness and Creativity Enhancement Program Through E-Learning Platform: A Case of Maizbhander Foundation's Meddhabikash Program, Fatikchari, Bangladesh

“…Razak (2019) highlights that certain IFIs prefer assigning top Shari'ah figures into their Shari'ah committees who bring more added value to the institution in terms of reputation and creditability. Moreover, Baklouti (2020) emphasizes that having well-reputable SC members attracts a significant number of customers and depositors, which can reduce the liquidity risk of IBs. As a result, these factors may lead customers to entrust and lend their money to these IBs, facilitating these banks' access to higher capital.…”

“…On the contrary, formed on the busyness hypothesis, others assert that directors with multiple directorships that are overcommitted might become less effective corporate monitors due to busyness (Fich & Shivdasani, 2006;Clements et al, 2015). Correspondingly, in the context of IFIs, having SC members with multiple board assignments might not have sufficient time and attention to fulfill their multiple board duties (Grassa & Matoussi, 2014;Baklouti, 2020). Further, due to the director's access to each bank's strategic information, the SCMD may create problems of confidentiality and a conflict of interest (Hamza, 2013;Hamdi & Zarai, 2014) because of serving on the boards of the competitors.…”

Participation Banks in Turkey: Issues and Proposes Strategies Based on SWOT Analysis

“…The establishment of sound sharia advisory board will help Islamic financial industry to operate in a fully sharia principle, therefore the trust on financial system can be thoroughly delivered to the society and effect to the augment of the volume (Esen & Karabacak, 2014). Baklouti (2020) asserts the point that good characteristics of sharia advisory board in Islamic banking will affect to the financial performance of the bank. However, this finding contradicts to the study conducted by Yanikkaya & Pabuccu (2017) that the sharia governance in participatory banks in Turkey is still not optimal.…”

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

“…The implications of self-potency on CEOs have been discussed in studies on upper echelon theory from a variety of perspectives, including hubris (Akstinaite et The study on the existence of SSB as a CG feature was developed according to its characteristics in influencing company performance. The latest study tries to investigate the competence of SSB as measured by expertise and reputation in influencing company performance (Baklouti, 2020). However, Baklouti (2020) This study is focused on the moderating impact of SSB on the relationship between CEO hubris and IBs' performance.…”

“…The latest study tries to investigate the competence of SSB as measured by expertise and reputation in influencing company performance (Baklouti, 2020). However, Baklouti (2020) This study is focused on the moderating impact of SSB on the relationship between CEO hubris and IBs' performance. The moderating of the SSB variable is used to encourage the corporate governance mechanism (Neifar et Indonesian IBs are established in the form of corporations based on the law.…”