Corporate governance and IFSB standard-4: evidence from Islamic banks in Bangladesh

Abstract

Purpose

This paper aims to examine the compliance status of Islamic banks in Bangladesh with Shari’ah-based accounting standards named Islamic Financial Services Board (IFSB) standard-4 and its association with corporate governance.

Design/methodology/approach

The six years of secondary data, including the annual reports of 2013–2018, were collected from the websites of all the seven listed Islamic banks, i.e. 100% of the population available during the period of study. The study used a content analysis approach for systematically categorizing and analysing the contents disclosed in the annual report. A total compliance score based on 133 reporting items of IFSB standard-4 were considered for content analysis. Furthermore, this study applied the ordinary least square to investigate the impact of corporate governance on IFSB standard-4.

Findings

This study found that the level of compliance with the IFSB standard by the Islamic banks in Bangladesh is poor, as the overall compliance status is 44.83%. Further, this study observed a significant and positive influence of the Shari’ah supervisory committee, the board size, accounting experts on the board, foreign ownership and institutional ownership on the level of compliance with IFSB standard-4. On the other hand, this study found a negative effect of directors’ ownership on the level of compliance with IFSB standard-4.

Practical implications

This study provides the management of Islamic banks an insight into developing their governance characteristics to comply with Islamic accounting and reporting standards. Moreover, this study expects to facilitate the management of Islamic banks in designing their accounting and reporting outlines to enhance the level of compliance with the IFSB standards.

Originality/value

This pioneering study on IFSB standards opens an avenue to the researchers exploring the accounting and reporting status of Islamic banks considering the requirements of the IFSB standards.

Citation

Rashid, M.H.U., Khanam, R. and Ullah, M.H. (2022), "Corporate governance and IFSB standard-4: evidence from Islamic banks in Bangladesh", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 1, pp. 1-17. https://doi.org/10.1108/IMEFM-03-2020-0124