Mode of Islamic Bank Financing: Does Effectiveness of Shariah Supervisory Board Matter?

Abstract

This paper examines the relationships between the effectiveness of Shariah supervisory board (SSB), their remuneration and mode of financing Islamic bank. The SSB effectiveness is evaluated by an index based on 9 attributes score. This study comprises 18 Islamic banks in which operating in Malaysia from the year 2012 to 2013 as a sample. Our regression analysis shows that the effectiveness of SSB does not concern with the mode of Islamic bank financing. However, we found that SSB remuneration and bank's financial growth shown a positive and significant relationship with mode of financing. The implications of these findings are discussed.

Firm Risk and Performance: The Role of Corporate Governance in Hwa Tai Sdn Bhd

“…Moreover, Bhatti and Bhatti (2010) found that since shariah governance is part of corporate governance, thus, good and effective SSB should reflect the issue of independence, transparent, accountable, responsible, and fair. Contradictory to the finding of Waemustafa and Abdullah (2015) who found that although the existence of SSB seemed able to monitor Islamic banking activities, there are still Islamic banks have experienced failure similar to that of conventional in the recent year. Somehow, Hwa Tai doesn't practice the Shariah Supervisory…”

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