Determinants and consequences of maqashid sharia performance: evidence from Islamic banks in Indonesia and Malaysia
Journal of Islamic Accounting and Business Research
ISSN: 1759-0817
Article publication date: 14 February 2023
Issue publication date: 22 November 2023
Abstract
Purpose
This study aims to examine how sharia supervisory board (SSB) characteristics are determinants of the maqashid sharia performance (MSP) of Islamic banks (IBs) and how MSP has implications for profitability and for profit-sharing investment account holders (PSIAHs).
Design/methodology/approach
MSP is ascertained by semi-structured interviews. The SSB characteristics measured are size, cross-membership, education level, expertise, reputation, rotation and remuneration. Annual reports of Indonesian and Malaysian IBs from 2010 to 2018 are analysed using panel data regression.
Findings
In Indonesia, SSB education level attenuates MSP, while other characteristics have only minor influence. However, in Malaysia, SSB size, education and reputation reinforce MSP, while others are ineffective. MSP in both countries is pseudo-Islamic; so their customers ignore religiosity. However, MSP in Malaysia can improve profitability because sharia assurance is more transparent; meanwhile, MSP in Indonesia cannot improve profitability because sharia assurance is less transparent.
Practical implications
In order for MSP to improve in Indonesia, the regulators need to increase SSB size, reduce cross-membership and arrange the format for sharia assurance in SSB reports, while IBs need to increase SSB education and expertise.
Originality/value
MSP is constructed in accordance with legal and social requirements to achieve IBs’ Islamic, economic, social and ethical objectives. Resource dependence theory is used to evaluate SSB, while PSIAH and profitability are investigated to demonstrate the impact of MSP. Finally, comparing SSB capabilities in Indonesia and Malaysia could be beneficial to regulatory and IB policies.
Keywords
Acknowledgements
Funding: This project has received funding from Universitas Internasional Batam under grant agreement number 317/LPPM/KP-UIB/XII/2021.
Citation
Taufik, M., Muhammad, R. and Nugraheni, P. (2023), "Determinants and consequences of maqashid sharia performance: evidence from Islamic banks in Indonesia and Malaysia", Journal of Islamic Accounting and Business Research, Vol. 14 No. 8, pp. 1426-1450. https://doi.org/10.1108/JIABR-07-2021-0205
Publisher
:Emerald Publishing Limited
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