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Article
Publication date: 30 March 2020

Islam Abdeljawad, Ghassan A.I. Oweidat and Norman Mohd Saleh

This paper aims to explore how the presence of an audit committee is associated with other corporate governance mechanisms, i.e. board structure, ownership structure and…

Abstract

Purpose

This paper aims to explore how the presence of an audit committee is associated with other corporate governance mechanisms, i.e. board structure, ownership structure and quality of external audit. The present study evaluated whether the presence of the audit committee complements or substitutes other governance mechanisms in Palestinian companies. Moreover, the effect of investment opportunities on the relationship between the formation of the audit committee and the quality of the auditor was addressed.

Design/methodology/approach

The association between the formation of the audit committee and other governance variables was modelled as a binary logistic model. The sample comprising 44 firms listed on Palestine exchange for the period between 2013 and 2017, amounting to 220 firm-year observations.

Findings

Based on the investigation, the results have indicated that board independence, the distinction between the chairman and chief executive officer function, ownership concentration and audit quality enhance the chance of audit committee formation, implying complementary effect. Contrastingly, board size and board ownership serve as a substitute to audit committee formation. It has also been found that investment opportunities act as an effective moderating factor that strengthens the relationship between audit quality and the formation of the audit committee.

Originality/value

The study provides valuable insight into the interaction between multiple corporate governance mechanisms within the economy of Palestine where the external uncertainty is high and investment opportunities are constrained by the decisions of the occupying authority. The findings may help regulators and policymakers in Palestine alongside those of other countries with similar environmental features to revise and update their corporate governance codes to ensure that the best control can be achieved, subsequently attracting more foreign and domestic investments.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 5 June 2017

Islam Abdeljawad and Fauzias Mat Nor

The purpose of this paper is to investigate how the timing behavior and the adjustment toward the target of capital structure interact with each other in the capital…

Abstract

Purpose

The purpose of this paper is to investigate how the timing behavior and the adjustment toward the target of capital structure interact with each other in the capital structure decisions. Past literature finds that both timing and targeting are significant in determining the leverage ratio which is inconsistent with any standalone framework. This study argues that the preference of the firm for timing behavior or targeting behavior depends on the cost of deviation from the target. Since the cost of deviation from the target is likely to be asymmetric between overleveraged and underleveraged firms, the direction of the deviation from the target leverage is expected to alter the preference toward timing or targeting in the capital structure decision.

Design/methodology/approach

This study used the GMM system estimators with the Malaysian data for the period of 1992-2009 to fit a standard partial adjustment model and to estimate the speed of adjustment (SOA) of capital structure.

Findings

This study finds that Malaysian firms, on average, adjust their leverage at a slow speed of 12.7 percent annually and this rate increased to 14.2 percent when the timing variable is accounted for. Moreover, the SOA is found to be significantly higher and the timing role is lower for overleveraged firms compared with underleveraged firms. Overleveraged firms seem to find less flexibility to time the market as more pressure is exerted on them to return to the target regardless the timing opportunities because of the higher costs of deviation from the target leverage. Underleveraged firms place lower priority to rebalance toward the target compared with overleveraged firms as the costs of being underleveraged are lower and hence, these firms have more flexibility to time the market.

Research limitations/implications

The findings of this study support that firms consider both targeting and timing in their financing decisions. No standalone theory can interpret the full spectrum of empirical results. The empirical work is based on partial adjustment model of leverage; however, this model has been criticized by inability to distinguish between active adjustment behavior and mechanical mean reversion. This is an avenue for future research.

Originality/value

This study investigates if targeting and timing behaviors are mutually exclusive as theoretically expected or they can coexist. A theoretical explanation and an empirical investigation support the conclusion that firms consider both targeting and timing in their financing decisions. This study provides evidence from Malaysian firms that are characterized by concentrated ownership structure and separation of cash flow rights and control rights of the firm due to pyramid ownership structure. Therefore, it provides evidence on how environmental characteristics may affect the capital structure determinants of the firm.

Details

International Journal of Managerial Finance, vol. 13 no. 3
Type: Research Article
ISSN: 1743-9132

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Book part
Publication date: 14 December 2018

Abstract

Details

Management of Islamic Finance: Principle, Practice, and Performance
Type: Book
ISBN: 978-1-78756-403-9

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Article
Publication date: 22 March 2013

Mamunur Rashid, Islam Abdeljawad, Siti Manisah Ngalim and M. Kabir Hassan

The purpose of this paper is to investigate customer‐centric corporate social responsibility (CSR) in Islamic banks of Bangladesh, Malaysia and the Arabian Gulf Region…

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Abstract

Purpose

The purpose of this paper is to investigate customer‐centric corporate social responsibility (CSR) in Islamic banks of Bangladesh, Malaysia and the Arabian Gulf Region. The new framework is found from the incomplete link between managerial motivation and their actual involvement with CSR activities.

Design/methodology/approach

The study uses annual reports of 16 Islamic banks from three regions. Using content analysis method, the study produces an ethical identity index on eight dimensions. The average index scores are ranked to get a view of the importance given by Islamic banks to the path of social responsibility.

Findings

In this study, the customer‐centric CSR framework assumes that there are two layers of CSR involvement in Islamic banks. The upper layer assures the commitment towards Allah (SWT) by operating under Islamic Shari'ah. The bottom layer ensures the commitment towards customers, employees and society. The reports of Islamic banks show that the selected banks are too customer centric and efficiency driven. However, that efficiency is targeted at the cost of sacrificing Shari'ah norms. Their commitments to basic Islamic rules fall far behind the average.

Research limitations/implications

The study uses content analysis of the annual report to identify CSR involvement of the Islamic banks. There are various issues related to CSR and corporate management that are not reported in annual reports. Moreover, disclosure norms and regulation also have an influence on reporting standards. Thus, this study is limited to what is found in the reports only.

Originality/value

The study contributes to the existing literature on customer‐centric CSR and customer‐centric marketing. There is evidence that the findings from this study are consistent with other studies. Islamic banks are becoming customer centric because of the competition from conventional banks. However, they must not forget the very essence of the establishment of these banks which is the spiritual freedom based upon sole submission to Allah (SWT).

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Book part
Publication date: 14 December 2018

Shatha Qamhieh Hashem and Islam Abdeljawad

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic…

Abstract

This chapter investigates the presence of a difference in the systemic risk level between Islamic and conventional banks in Bangladesh. The authors compare systemic resilience of three types of banks: fully fledged Islamic banks, purely conventional banks (CB), and CB with Islamic windows. The authors use the market-based systemic risk measures of marginal expected shortfall and systemic risk to identify which type is more vulnerable to a systemic event. The authors also use ΔCoVaR to identify which type contributes more to a systemic event. Using a sample of observations on 27 publicly traded banks operating over the 2005–2014 period, the authors find that CB is the least resilient sector to a systemic event, and is the one that has the highest contribution to systemic risk during crisis times.

Details

Management of Islamic Finance: Principle, Practice, and Performance
Type: Book
ISBN: 978-1-78756-403-9

Keywords

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Book part
Publication date: 8 September 2017

Sherif El-Halaby, Khaled Hussainey and Abdullah Al-Maghzom

The authors measure the impact of culture on Sharia; Social and Financial Disclosure (SSFD) of Islamic Banks (IBs) around the world.Content analysis is used to measure…

Abstract

The authors measure the impact of culture on Sharia; Social and Financial Disclosure (SSFD) of Islamic Banks (IBs) around the world.

Content analysis is used to measure levels of disclosure for a sample of 136 IBs of 25 countries for years 2013 and 2014. Different cultural measures are used. These include secrecy/transparency as suggested by Gray (1988) and Hofstede (1980, 1983, 2001, 2010)’s culture dimensions which include: Power Distance; Individualism; Masculinity; Uncertainty Avoidance; Long-Term Ordination and Indulgence. Ordinary least square (OLS) regression is used to test the research hypotheses.

After controlling bank-specific, corporate governance and country characteristics, the authors found that Hofstede’s culture dimensions have a significant impact on SSFD. They also found that Gray's transparency dimension positively influence levels of sharia, social and aggregated disclosure. Therefore, they conclude that culture influences levels of disclosure in IBs.

This study has policy implications for managers and regulators of Islamic banking industry.

This study is the first to use both Gray and Hofstede models in the context of IBs around the world. It also the first to explore the impact of culture on three different disclosure levels for IBs.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-78714-527-6

Keywords

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Article
Publication date: 15 July 2021

Ejaz Aslam and Razali Haron

This paper aims to investigate the impact of corporate governance and other related factors on the risk-taking of Islamic banks. Risk-taking is defined according to credit…

Abstract

Purpose

This paper aims to investigate the impact of corporate governance and other related factors on the risk-taking of Islamic banks. Risk-taking is defined according to credit risk, liquidity risk and operational risk.

Design/methodology/approach

The study uses the two step system generalized method of moment (2SYS-GMM) estimation technique by using a panel data set of 129 Islamic banks (IBs) from 29 countries in the Middle East, South Asia and the Southeast Asia regions covering from 2008 to 2017. Governance variables incorporated include board size, board independence, chief executive officer (CEO) power, Shariah board and audit committee, as well as other control variables.

Findings

This study provides evidence that board size and Shariah board are positively and significantly related to credit and liquidity risk. Board independence and CEO power are negative and significantly associated with credit and liquidity risk, but the audit committee has a mixed relationship with bank risk. Male CEOs take more risk compared to the female and more board meeting has an inverse relationship with Islamic banks risk. Bank size, however, does not influence the level of risk in Islamic banks, but leverage has an inverse relationship with bank risk.

Research limitations/implications

The present study sheds light on the risk-taking behaviour of the board of IBs, particularly the board independence and CEO power reducing the level of risk in IBs thereby contributing to the agency theory. Therefore, regulators and policymakers can use the findings of this study to strengthen the internal corporate governance mechanism to protect IBs at a time of financial distress. Moreover, it increases the trust of the shareholders and stakeholders in the effectiveness of governance reforms that have been pursued to reap long-term benefits.

Originality/value

To the best of the knowledge, this research is preliminary in examining the board behaviour on risk-taking of IBs from four different regions. The results are robust and suggest that the board of directors mitigate the level of risk in IBs.

Details

Corporate Governance: The International Journal of Business in Society, vol. 21 no. 7
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 12 June 2017

Zayyad Abdul-Baki and Ahmad Bukola Uthman

This paper aims to argue that the current environment in which the Islamic banking system is situated is not ideal for the system’s pursuance of its socioeconomic ideals…

Abstract

Purpose

This paper aims to argue that the current environment in which the Islamic banking system is situated is not ideal for the system’s pursuance of its socioeconomic ideals, thus necessitating the system’s shift from pursuing falah to maximizing profits.

Design/methodology/approach

The paper theorizes and conceptualizes this shift from falah to profit maximization using two complementary theories – systems theory and institutional theory – to prove that such a shift is not unexpected. The paper further adopts a dialectical analysis that is somewhat historical to analyse the shift.

Findings

The measure of the Islamic banks’ performance in terms of their social ideals is misplaced, as the environment in which they currently operate does not support such goals. Thus, stemming from the theoretical base, the Islamic banks’ pursuance of profit maximization instead of falah should not be unexpected. The paper concludes that despite the unfavorable environment, the social ideals of the Islamic banking system may still be met, to an extent, through investment in microfinance and awqaf.

Research limitations/implications

The paper adopts document analysis for sourcing data majorly from prior studies. Hence, the authors do not conclude that the analysis herein is applicable to all Islamic banks. Secondly, as the authors could not get a complete historical account of the Islamic banking system’s development, some aspects of the dialectical analysis – contradiction and change – have been discussed in a general fashion.

Practical implications

The need for Islamic banks in the current environment, especially for the Muslim population, cannot be over emphasized; however, the achievement of falah given this current environment may be daunting.

Originality/value

The current analyses of the shift of Islamic banks from pursuing falah to pursuing profit maximization are not well-defined, as they lack a proper theorization of the challenges faced by Islamic banks. This paper fills this gap.

Details

Journal of Islamic Accounting and Business Research, vol. 8 no. 3
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 11 September 2018

Yazeed Alfakhri, Mohammad Nurunnabi and Demah Alfakhri

The purpose of this paper is to analyse the citations of scientific research on the concept of corporate social responsibility (CSR) from 1970 to 2014. In particular…

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1208

Abstract

Purpose

The purpose of this paper is to analyse the citations of scientific research on the concept of corporate social responsibility (CSR) from 1970 to 2014. In particular, several interconnected research questions were investigated: How did the conceptualisation of CSR change from 1970 to 2014? What is the general direction of the change? How does Islamic CSR emerge?

Design/methodology/approach

An in-depth analysis was performed with the use of the data analysis tool available in the Web of Science. The study categorises CSR into four areas: business ethics and corporate governance; management; marketing; and others. The first three categories were based on the Chartered Association of Business Schools’ Academic Journal Guide 2010 and 2015 (UK).

Findings

The findings reveal that 67.19 per cent articles have been published based on the ranked journals of Academic Journal Guide 2010 and 2015. The findings of the study will help to inform future areas of CSR. The top journals which published most articles from Academic Journal Guide 2015 are Journal of Business Ethics and Corporate Social Responsibility and Environmental Management.

Practical implications

The findings suggest that the remit of sustainability from Islamic perspective is wider. Islamic marketing, as an area, remains largely in need of empirical research. The business communities should successfully integrate Muslim communities into their marketing strategies.

Originality/value

To the best of the knowledge, this is the first study to explore citation analysis of general CSR literature and Islamic CSR. The study finds that there has been an increase in interest in this subject of CSR and Islam in the recent years. Future research is needed on theory and methodological analysis of general CSR field and Islamic CSR field.

Details

Journal of Islamic Marketing, vol. 9 no. 3
Type: Research Article
ISSN: 1759-0833

Keywords

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Article
Publication date: 20 January 2020

Wan Noor Hazlina Wan Jusoh and Uzaimah Ibrahim

The purpose of this paper is to investigate Malaysian practitioners’ general perspective on corporate social responsibility (CSR) of Islamic banks and their views on…

Abstract

Purpose

The purpose of this paper is to investigate Malaysian practitioners’ general perspective on corporate social responsibility (CSR) of Islamic banks and their views on having a special CSR framework.

Design/methodology/approach

This study used semi-structured face-to-face interviews, which contained both qualitative and quantitative data. The study also used observation and document review to support the data drawn from the research participants whenever necessary.

Findings

In total, 34 practitioners from all 16 Islamic banks in Malaysia responded to the interview questions designed for this purpose. The results show that the majority of the research participants viewed positively that Islamic banks should have a special CSR framework.

Practical implications

The Islamic concepts of CSR will be of interest not only to academicians but also, especially, to Islamic financial institutions. This paper will also send a strong signal to regulators that they should develop and introduce an Islamic CSR framework to Islamic financial institutions, especially Islamic banks.

Originality/value

This paper contributes to the growing debate on CSR among Islamic financial institutions, especially in the Islamic banking industry, by investigating practitioners’ views on having a CSR framework. In addition, to the knowledge of the authors, this is the first research that has involved Chief Executive Officers, Heads of Shari’ah, and Heads of Corporate Communications as research participants to talk about the CSR of Islamic banks.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 4
Type: Research Article
ISSN: 1759-0817

Keywords

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