A Quantitative Study of the Role Shariah Boards and Bank Ownership Structures Play in Enhancing the Financial Performance of Islamic Banks: A Case of Pakistan

Authors

  • Qaiser Abbas Department of Commerce, Bahauddin Zakariya University, Multan, Pakistan
  • Sheila Ainon Yussof SHAY International Consultancy, Malaysia
  • Muhammad Naeem Anjum University of Sargodha Bhakkar Campus, Pakistan

DOI:

https://doi.org/10.52282/icr.v11i2.784

Keywords:

shariah governance, Islamic banks financial performance, ownership structure of Islamic banks

Abstract

Shariah governance is a central feature and the second layer of corporate governance for Islamic banks (IBs) and Islamic financial institutions (IFIs). Shariah governance is unique to IBs and IFIs due to their possession of Shariah Supervisory Boards (SSB). SSBs serve to ensure that the management of Islamic banking institutions complies with shariah principles. Shariah governance is not only designed to raise the confidence of investors and the public in terms of authenticity and compliance to Islamic banking practices, but also to minimise the fiduciary and reputational risks of Islamic banking institutions. Due to the importance of shariah governance and the role of SSBs in IBs, this research investigates the role of SSBs in influencing the financial performance of IBs with the moderation role of ownership structure in Pakistan. By using nine years of data (2009-2017) pertaining to three Islamic banks in Pakistan, we found that shariah supervisory board reputations, expertise, cross membership, change in composition, shariah qualification, and ownership have significant moderation relationships with the financial performance of IBs. This study is an attempt to provide a deeper understanding of the role of owners and Shariah Supervisory Boards in enhancing the financial performance of Islamic banks for both researchers and policymakers.

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Author Biographies

Sheila Ainon Yussof, SHAY International Consultancy, Malaysia

Principal Consultant at SHAY International Consultancy, Malaysia.

Muhammad Naeem Anjum, University of Sargodha Bhakkar Campus, Pakistan

Assistant Professor at the Department of Business Administration, University of Sargodha Bhakkar Campus, Pakistan.

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Published

2020-12-30

How to Cite

Qaiser Abbas, Sheila Ainon Yussof, and Muhammad Naeem Anjum. 2020. “A Quantitative Study of the Role Shariah Boards and Bank Ownership Structures Play in Enhancing the Financial Performance of Islamic Banks: A Case of Pakistan”. ICR Journal 11 (2):204-24. https://doi.org/10.52282/icr.v11i2.784.