Education strategy misfit, board effectiveness and Indonesian Islamic bank performance

Abstract

Purpose

This study aims to provide empirical evidence on the contingency factors that affect the implementation of education strategies and the impact of education strategy misfit on the performance and effectiveness of the board’s moderating role on the misfit level and performance of Islamic banks.

Design/methodology/approach

This research is a quantitative study with pooled ordinary least square panel data during the years 2007-2014 from all Indonesian Islamic commercial banks. Islamic bank performances are measured by the level of profitability and sharia financial performance. Board effectiveness is analysed by measuring the effectiveness of both the board of commissioners (BoC) and the sharia supervisory board (SSB).

Findings

This study proves that organisational competent qualities and chief executive officer tenure are the contingency factors that affect the implementation of the education strategy. This study’s results indicate that the effectiveness of both the BoC and SSB has a positive impact on the bank’s profitability and sharia financial performance. The results also show that misfit has a negative effect on sharia financial performance and that board effectiveness is proved to reduce the negative impact of a misfit on sharia financial performance. However, there is no strong evidence that board effectiveness reduces the negative impact of a misfit on profitability.

Originality/value

This study emphasises the importance of enhancing the competence and innovation of organisations in the implementation of education strategy and the need for synergy and increased capabilities among board members to achieve well-established Islamic bank performance.

Citation

Wijayanti, R., Diyanty, V. and Laela, S.F. (2020), "Education strategy misfit, board effectiveness and Indonesian Islamic bank performance", Journal of Islamic Accounting and Business Research, Vol. 11 No. 4, pp. 929-944. https://doi.org/10.1108/JIABR-04-2017-0052