Social Performance of Islamic Banks in South-East Asia: Is Intellectual Capital and Sharia Supervisory Boards Matters?

Abstract

This study aimed to examine Islamic banks' social performance by considering the effect of Intellectual Capital (IC) and Shariah Supervisory Boards (SSB) aspects which are SSB educational background and SSB gender diversity. This study employed longitudinal sample of Islamic banks in South-east Asia region with a sample of 32 Islamic banks during the period 2005-2020. To test the research hypotheses, panel data regression model analysis was applied. The findings revealed that intellectual capital has a positive impact on the social performance of Islamic banks, demonstrating that greater utilization of intellectual capital leads to improved social performance. Gender diversity among SSBs also has a positive impact on social performance, according to the findings. It can be concluded that the presence of woman in Supervisory Boards could give more broad perspectives in decision-making so that social performance conducted by Islamic banks will lead to an improvement in the activity's contribution. Meanwhile, Contrary to popular belief, PhD-qualified members with research and analytical skills appear to bring no value to social performance. The control variable of bank size doesn't have effect on Islamic banks' social performance. Overall, this research contributes to a better understanding of the impact of IC and SSB governance in improving Islamic banks' social performance functions.

Intellectual Capital and Social Performance of Indonesian Islamic Banks: The Role of Sharia Supervisory Boards Monitoring Activities

“…Several previous studies have explained that a company's competitive advantage can be associated with corporate social performance (Greening & Turban, 2000;Gregory et al, 2016). From an Islamic banking perspective, previous research (Fatah et al, 2022;Nawaz & Haniffa, 2017;Pratama et al, 2020Pratama et al, , 2021Pratama et al, , 2022Setianto & Sukmana, 2016) has shown that IC has a positive impact on Islamic banking performance. Based on the description above, the hypothesis proposed in this study is as follows: H1: Intellectual capital has a positive effect on the Social Performance of Islamic Banks…”

Human capital and financial performance of Islamic banks: a meta-analysis

“…Hence, there is an emphasis on high standards of education and training in Islamic banking to effectively contribute to the social performance of Islamic banks. In addition, Sharia Supervisory Board members are expected to have skills, know-how and experience in the fields of shariah, accounting and finance, which is important for addressing sharia issues and economic challenges (Pratama et al, 2022). The human capital in Islamic banking differs from conventional banking in terms of the specific expertise and knowledge required for shariah compliance, as well as the unique regulatory framework governing Islamic financial institutions (Ali and Kasim, 2019).…”

“…, 2021; Ousama et al. , 2020; Pratama et al. , 2022), honesty, transparency, trustworthiness, personal development based on worship, faith, science, charity and missionary endeavor, high integrity, application of values of justice (Supriyatni, 2021; Suryadi et al.…”

“…, 2019; Dahlifah and Nopia, 2017; Muhammad and Nugraheni, 2022; Nawaz, 2019b; Prasojo et al. , 2022b; Pratama et al. , 2022), customer service excellence (Aslam et al.…”

“…The knowledge, skills and abilities required from human capital in Islamic banking (Table 1) include but not limited to the knowledge of Shariah (Adznan et al, 2022;Ali et al, 2020;Ali and Kasim, 2019;Haron, 2020, 2021;Asutay and Ubaidillah, 2023;Basak et al, 2022;Belal et al, 2019;Farooque et al, 2023;Muafi et al, 2017;Nawaz et al, 2021;Ousama et al, 2020;Pratama et al, 2022), honesty, transparency, trustworthiness, personal development based on worship, faith, science, charity and missionary endeavor, high integrity, application of values of justice (Supriyatni, 2021;Suryadi et al, 2023), understanding of Islamic economics, Islamic finance and Islamic accounting and auditing (Aslam et al, 2023;Belal et al, 2019;Dahlifah and Nopia, 2017;Muhammad and Nugraheni, 2022;Nawaz, 2019b;Prasojo et al, 2022b;Pratama et al, 2022) (Aslam et al, 2023;Aslam and Haron, 2020;Basak et al, 2022;Nawaz, , 2019b, ability of innovation and creativity (Aslam et al, 2023;Aslam and Haron, 2020;Basak et al, 2022;Dahlifah and Nopia, 2017;Nawaz, , 2019b, adherence to religious trust and beliefs (Basak et al, 2022), ability to research (Akkas and Asutay, 2022b;Aslam et al, 2023), commitment to Islamic normative principles (Akkas and Asutay, 2022b;Belal et al, 2019), risk management (Aslam et al, 2023), knowledge of Shariah-compliant bank...…”