Shariah Governance Practices of Malaysian Islamic Banks in the Light of Shariah Compliance

Masruki, Rosnia; Hanefah, Mustafa Mohd; Dhar, Bablu Kumar

doi:10.17576/ajag-2020-13-08

Cited by 12 publications

(13 citation statements)

References 12 publications

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“…It is argued that majority financial institutions in Saudi have mainly disclosed the Shariah governance information in terms of the oversight responsibilities of the committee in relation to Shariah matters and the policies made by the financial institutions in compliance with the Shariah principles (Azid and Alnodel, 2019). Masruki et al (2020) highlighted the importance of the Shariah governance disclosure to emphasise an effective Shariah governance practices in IBs in Malaysia. The study performed content analysis on the annual report of IBs from 2012 to 2016 to analyse the Shariah compliance disclosure in terms of the components of Shariah Committee members, Shariah review, Shariah audit and Shariah risk management as well as transparency and disclosure as highlighted in the SGF (Bank Negara Malaysia, 2010).…”

Section: Shariah Compliance Disclosurementioning

confidence: 99%

“…Academic interest in the studies of Shariah governance in IFIs has argued about the importance of Shariah compliance disclosure in terms of its current practices and the compliance of IFIs towards the minimum requirement of information to be disclosed in the Shariah Committee Report (Abdul Aziz et al , 2019; Azid and Alnodel, 2019; Fatmawati et al , 2020; Grassa et al , 2019; Hasan and Asutay, 2020; Masruki et al , 2020; Noordin and Kassim, 2019). Previous empirical studies have evaluated the Shariah compliance disclosure based on the different regulatory requirements in many jurisdictions such as Malaysia, the GCC and MENA countries as well as UK.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Masruki et al (2020) highlighted the importance of the Shariah governance disclosure to emphasise an effective Shariah governance practices in IBs in Malaysia. The study performed content analysis on the annual report of IBs from 2012 to 2016 to analyse the Shariah compliance disclosure in terms of the components of Shariah Committee members, Shariah review, Shariah audit and Shariah risk management as well as transparency and disclosure as highlighted in the SGF (Bank Negara Malaysia, 2010).…”

Section: Literature Reviewmentioning

confidence: 99%

“…The information related to the detailed work performed by the Shariah compliance functions has hardly been disclosed. It is argued that the findings potentially reflect that IBs currently rely heavily on the competency of the Shariah Committee members and do not provide higher disclosure on the Shariah compliance functions (Masruki et al , 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

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The extent of mandatory and voluntary Shariah compliance disclosure: evidence from Malaysian Islamic financial institutions

Ghani

Ariffin

Rahman³

2023

JIABR

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Purpose This study aims to assess the extent of the mandatory and voluntary Shariah compliance disclosure in the Shariah Committee Report of Islamic financial institutions (IFIs) in Malaysia. The study highlights the accountability and transparency of the Shariah Committee members to provide full disclosure of relevant Shariah compliance information to the stakeholders. Design/methodology/approach The study adopts content analysis to quantify and code the number of sentences in the Shariah Committee Report disclosed in the 2016 annual report of 47 IFIs in Malaysia. The extent of Shariah compliance disclosure in the Shariah Committee Report is measured based on the Standard (S) and Guidance (G) items outlined in the Shariah Governance Framework (SGF) as well as the Financial Reporting for Islamic Banking Institutions and takaful operators guidelines issued by Bank Negara Malaysia (BNM) as the reference. Findings The findings indicate that majority of IFIs complied with the minimum mandatory disclosure requirement based on the Standard (S) items in the Shariah Committee Report as required by the SGF. Highest information on the purpose of Shariah Committee engagement and scope of work performed is disclosed to the stakeholders in almost all IFIs. Only two prominent full-fledged Islamic bank and Islamic banking business in development financial institutions have shown highest accountability to go beyond the minimum disclosure requirement. This includes disclosing higher voluntary information on Shariah governance processes in the Shariah Committee Report of these two IFIs. Research limitations/implications This study adopts the SGF (Bank Negara Malaysia, 2010), Financial Reporting for Islamic Banking Institutions (Bank Negara Malaysia, 2016) and Financial Reporting for Takaful Operators (Bank Negara Malaysia, 2015) as the reference to develop the measurement of Shariah compliance disclosure in the Shariah Committee Report. These guidelines issued by BNM are still effective during the period of study, i.e. the year 2016. Practical implications The findings contribute towards the relevance for BNM as the regulator to enhance the current disclosure requirement in the Shariah Committee Report as stated in the SGF especially in Islamic windows and takaful operators. The main argument of this paper is that the more information being disclosed in the Shariah Committee Report will lead to better Shariah assurances. The issuance of Shariah Governance Policy Document in 2019 is expected to enhance the credibility, accountability and transparency of the Shariah Committee members concerning their oversight responsibility towards Shariah matters in IFIs’ business operations. Originality/value After five years since the issuance of the SGF in 2010, further study on the extent of mandatory and voluntary Shariah compliance disclosure is important to highlight the accountability and transparency on the implementation of the Shariah governance across various types of IFIs in Malaysia.

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Section: Shariah Compliance Disclosurementioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

The extent of mandatory and voluntary Shariah compliance disclosure: evidence from Malaysian Islamic financial institutions

Ghani

Ariffin

Rahman³

2023

JIABR

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“…The selection of the aforesaid countries is based on the fact that Malaysia and the GCC countries serve as models for Islamic procedures, structures and methods that others can adopt (Hasan, 2011;Masruki et al, 2020aMasruki et al, , 2020bMusleh Alsartawi, 2021). Indeed, ICD-Refinitiv (2020) noted that Islamic banking held 69% in global Islamic finance assets compare to sukuk, takaful and other islamic funds.…”

Section: Introductionmentioning

confidence: 99%

Shariah governance disclosure and its effect on Islamic banks' financial performance: evidence from Malaysia and GCC countries

Rahim

Shaharuddin

Suki

2023

JIABR

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Purpose The purpose of this study is to examine the level of Shariah governance disclosure among Islamic banks in Malaysia and the Gulf Cooperation Council (GCC) countries (i.e. Kuwait, Bahrain, United Arab Emirates, Qatar, Oman and Saudi Arabia). On top of that, the effect of Shariah governance disclosure on Islamic banks financial performance is investigated. Design/methodology/approach Data underwent quantitative content analysis and a mean comparison of the Shariah governance disclosure mechanisms as well as multiple regression analysis. Shariah governance information is obtained from the Islamic banks' official websites and the Bursa Malaysia Exchange. Findings The results of the content analysis revealed that the level of Shariah governance disclosure among Malaysian Islamic banks has been more pronounced than in the GCC countries. Additionally, the multiple regression analysis results specified that of the five Shariah governance disclosure mechanisms, the Shariah committee emerged as the strongest determinant in the financial performance of the Islamic banks, followed by transparency and disclosure. Practical implications Islamic banks should emphasise publishing Shariah governance information in annual reports to reflect superior accounting practices as assessed by certified Shariah auditors with an effective monitoring system. Originality/value The empirical findings are vital for serving as a guideline for Islamic banks in Malaysia and the GCC countries to disclose their practice of Shariah governance and gain empirical insights into its effect on firms’ financial performance. Following that, Islamic banks would improve their accounting practices while adhering to Shariah principles, strengthen internal controls and boost their brand reputation.

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Shariah governance reporting of Islamic banks: An insight from Malaysia

Aspiranti,

Ali,

Sudrajad

et al. 2023

Cogent Business & Management

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Shariah Governance Practices of Malaysian Islamic Banks in the Light of Shariah Compliance

Cited by 12 publications

References 12 publications

The extent of mandatory and voluntary Shariah compliance disclosure: evidence from Malaysian Islamic financial institutions

The extent of mandatory and voluntary Shariah compliance disclosure: evidence from Malaysian Islamic financial institutions

Shariah governance disclosure and its effect on Islamic banks' financial performance: evidence from Malaysia and GCC countries

Shariah governance reporting of Islamic banks: An insight from Malaysia

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