The effect of audit committee quality on the conventional and Islamic banks' financial performance between subprime and Corona crises

Abstract

PurposeThis study aims to test empirically the differences between Islamic and conventional banks in terms of impacts of the audit committees' quality on financial performance between Subprime and Corona crises.Design/methodology/approachThe variables are articulated in four hypotheses tested by the GLS analysis. The data were collected via DATASTREAM and from banks' annual reports. The collected data covered four continents: America, Asia, Africa and Europe. The financial performance measures and audit committee's determinants of the conventional and Islamic banks concerned 112 banks of each type after the Subprime crisis and before the Corona crisis (2010–2019).FindingsResults showed that the audit committee reduced the profitability of two bank types. Moreover, it harmed the conventional banks' efficiency, but reported an unclear effect within Islamic banks. Even so, the authors noticed that the audit committee had a positive impact for the conventional banks' liquidity, while the same effect was apparently ambiguous on the Islamic banks' liquidity. For solvency, the audit committee positively influenced conventional banks, while it affected that of Islamic banks.Research limitations/implicationsEmpirically, the authors’ results can serve as a reference for decision-makers allowing to clarify the data on the financial competitiveness of two bank types to facilitate the planning of strategic performance programs based on the audit committee quality. Theoretically, researchers found that the differences between the results are due to the audit committee quality of each bank type or to the financial performance evaluation method. However, there are further factors that are related to the research peculiarities, the methodology, the data and the interpretation.Originality/valueBased on the comparative literature review between conventional and Islamic banks, this study is the first conditional and comparative research between the audit committee quality and the financial performance of conventional and Islamic banks in a specific period (after Subprime and before Corona crises).

The role of good corporate governance through investment decision support and its impact on banking performance with efficiency-based credit quality as intermediation

“…The research results of hypothesis 10 support previous research by (Arslan et al, 2014;Haddad et al, 2022). The research findings show that there is a mediating role of efficiency-based credit quality in the relationship between audit commitment and bank performance means that the banks in Indonesia that are the sample in providing credit are good at processing customer credit applications by paying attention to the health of the bank so that bad credit does not occur and can carry out efficiency in several posts, especially in terms of manpower operations, so that the supervision carried out by the audit committee also runs as it should and the bank's goal of achieving high performance can be achieved.…”

“…The test results of the fourth hypothesis found evidence that audit committees affect bank performance negatively but not significantly. These findings are by empirical research from (Haddad et al, 2021(Haddad et al, , 2022 which shows that there is an insignificant negative effect of the audit committee on company performance.…”

Audit Committee Characteristics and Firm Performance with the Moderating Role of Political Connections

“…The significance of expertise on the audit committee has been underscored by previous financial crises and historical company events (Haddad et al, 2022). Regulatory authorities across the globe have taken measures to enforce the requirement of having at least one financial specialist, possessing a background and/or experience in accounting, auditing, or financing, as a mandatory inclusion in the audit committee (Ahmed Haji, 2015).…”