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An evaluation of corporate governance practices of Islamic banks versus Islamic bank windows of conventional banks: A case of Pakistan

Khuram Shahzad Bukhari (Institute of Management Sciences, Bahauddin Zakariya University, Multan, Pakistan)
Hayat M. Awan (Air University, Multan, Pakistan)
Faareha Ahmed (Institute of Management Sciences, Bahauddin Zakariya University, Multan, Pakistan)

Management Research Review

ISSN: 2040-8269

Article publication date: 22 March 2013

4596

Abstract

Purpose

The purpose of this paper is to explore the perceived importance of management about various corporate governance dimensions being practiced in the Pakistani Islamic banking context.

Design/methodology/approach

AHP is applied to analyze the corporate governance indexes and its dimension of five Islamic banks and 12 conventional banks which are providing Islamic banking facilities (Islamic bank window) throughout Pakistan. These dimensions included board of directors (BOD), Shari'ah supervisory board (SSB), audit, investment account holders (IAH), and information disclosure & transparency.

Findings

The study reveals that the most significant dimensions which affect the corporate governance in Islamic banks are BOD and SSB, while the significant factors for Islamic banking windows are almost all dimensions of corporate governance. The correlation, regression, and ANOVA tests are applied to check the contributions of various factors of corporate governance mechanisms. These results indicate that there is a significant difference between Islamic banks and Islamic banking windows regarding the BOD and SSB. On the other hand, no significant difference is seen for the rest of the factors. The dissatisfaction level of customers reduces with the increase in the audit and BOD governance and all other factors have no impact in the case of Islamic banking windows; whereas in Islamic banks, in addition to audit and the SSB, information disclosure also significantly reduces the dissatisfaction level of customers. The concern of customers decreases significantly with the increasing level of IAH in the case of Islamic banking windows whereas in the case of Islamic banks a significant impact is seen for BOD, information disclosure, audit and IAH, but improvement in the governance of these rather increases the concern of customers toward compliance of Shari'ah and SSB has no contribution towards the concern of customers.

Originality/value

This study has practical significance for conventional and Islamic banking policy makers for understanding the requirements of their stakeholders and aligning them with the fundamentals of Shari'ah compliance according to the guidelines provided by the code of corporate governance so as to get better insight into the relationship between customers' motives behind using Islamic banking products.

Keywords

Citation

Shahzad Bukhari, K., Awan, H.M. and Ahmed, F. (2013), "An evaluation of corporate governance practices of Islamic banks versus Islamic bank windows of conventional banks: A case of Pakistan", Management Research Review, Vol. 36 No. 4, pp. 400-416. https://doi.org/10.1108/01409171311315003

Publisher

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Emerald Group Publishing Limited

Copyright © 2013, Emerald Group Publishing Limited

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