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This study aims to examine whether the soundness of Islamic banks is differently affected by corruption compared to conventional counterparts. Moreover, the Shari’ah supervisory board (SSB), as a cornerstone of Islamic banking and representing a multi-layer corporate governance model, is expected to moderate the influence of corruption on soundness for Islamic banks.

This study considers a unique sample of 1,528 observations on 71 Islamic banks and 120 conventional banks operating in 11 emerging and developing Muslim countries over the 2010–2017 period. This study uses generalized least squares regression model and the coefficients are estimated by using random-effects estimator. In addition, to overcome a potential endogeneity concern for corruption and bank stability relationship, this study uses Two-Stage Least Squares regression instrumental variable estimator.

The authors find consistent evidence that higher levels of corruption adversely impact the soundness for conventional banks, in favor of the sand the wheel hypothesis in the corruption–development nexus. However, as expected, this study finds a less negative impact of corruption on soundness of Islamic banks. Moreover, SSB moderates the relationship between corruption and soundness of Islamic banks. The findings are robust to a battery of alternative checks.

Findings of the paper regarding the detrimental impact of corruption on bank soundness justify the urgency of the anti-corruption campaigns in these countries, particularly for conventional banks. Moreover, the findings provide support for the positive contribution of SSBs to overcome the adverse effect of corruption on soundness of Islamic banks and thereby underscoring the need for enforcement and regulatory mechanism for SSBs to be more effective.

To the best of the authors’ knowledge, this is the first study to examine the moderating impact of Shari’ah supervision on the relationship between corruption and soundness of Islamic banks.

The purpose of this paper is to examine the Board of Directors’ characteristics and their impact on the financial soundness of Islamic banks.

Regression analysis is applied to test the impact of the Board of Directors’ characteristics on the financial soundness of Islamic banks, using a panel data set of 67 Islamic banks covering 20 countries from 2005 to 2018. The Z-score indicator is used to evaluate the Islamic banks’ soundness. To check the robustness of the results, this paper uses other dependent variables (CAMEL) than the Z-score.

The main results show that the presence of an independent non-executive director negatively impacts the financial soundness of Islamic banks, while the chief executive officer duality practice has a positive effect on it. Other characteristics of the Board of Directors do not significantly impact the financial soundness of Islamic banks (foreign director, institutional director, chairman with a Shari’ah degree, interlocked chairman and the Board of Directors’ size).

This study aims to fill the gaps in the literature that discuss the Board of Directors’ role in corporate governance and its impact on the financial soundness of Islamic banks. In other words, it shows the role played by the Board of Directors and improves the knowledge of the corporate governance-financial soundness relationship. Plus, managers, investors and regulators may gain evocative insights, particularly those looking to improve their Islamic banks’ soundness by restructuring their boards’ composition.

This study sheds new light on the literature on Islamic banking by clarifying the relationship between the Board of Directors and the financial soundness of Islamic banks. Contrary to previous research, this paper uses an additional hypothesis stating that a chairman with a Shari’ah degree (Fiqh Muamalt) has a positive impact on the financial soundness of Islamic banks.

The unique characteristic of Islamic bank leads in governance and disclosure. Using stakeholder, signaling, and market discipline theory, governance and adequate disclosure may increase bank soundness. This study aims to investigate the relationship of sharia disclosure and Sharia Supervisory Board in influencing Islamic bank soundness in the different regulatory framework of the country. Using purposive sampling, the research covered 84 Islamic banks in 16 countries during the period 2013–2015 with lag data of Islamic bank soundness. The result shows sharia disclosure influences on Islamic bank soundness for management efficiency, capital adequacy ratio, asset quality, and liquidity. The results also show that sharia disclosure mediates the indirect effect of SSB on Islamic bank soundness. The regulatory framework (sharia accounting standard and SSB regulation) shows moderating effect of regulation framework proved on the association of sharia disclosure with management efficiency, capital, and liquidity. The effect is indirectly depending on the regulatory framework for proxy management efficiency, capital, and liquidity. The implication of the research suggests that sharia disclosure could increase the market discipline mechanism of Islamic bank stream. The Islamic bank can increase the transparency using sharia disclosure as a branding for increasing public trust, even though in the deficient Islamic bank regulation countries.

The purpose of this study is to examine the relationship between corporate governance and financial soundness of Islamic banks. Precisely, this study examines the Shariah Board’s characteristics and empirically diagnoses its impact on the financial soundness of Islamic banks.

In this case, the level of bank soundness is individually measured using the z-score indicator. Regression analyses are applied to test the impact of the Shariah Board’s characteristics on the financial soundness of Islamic banks, using a panel data set of 67 Islamic banks – covering 20 countries during the period 2005–2014.

The model shows that the size of the Shariah Board has a negative and significant impact on the financial soundness of Islamic banks. However, the Shariah scholar with knowledge in finance/accounting, the presence of Mufti, the interlocked Shariah scholar and the foreign Shariah scholar do not have any significant impact on the financial soundness of Islamic banks.

This study contributes to fill the gaps in the literature that discussed the Shariah Boards’ role in the governance of Islamic banks. In addition, it provides practical implications to the Shariah Boards’ members in the Islamic banks and calls for setting a sufficient number of scholars for each Shariah Board.

With this paper, the authors aim to clarify the relationship between Shariah Board and financial soundness of the Islamic banking, and provide additional insights to the emerging literature of Islamic banking. Contrary to previous research studies, the authors use an additional hypothesis, i.e. the presence of Mufti that has a positive and significant effect on the financial soundness of Islamic Banks. Methodologically, the authors incorporate a new measure to evaluate empirically the impact of Shariah Board members with knowledge of finance and accounting on the financial soundness of Islamic banks.

This paper aims to examine whether the level of corruption affects profitability and soundness of Islamic banking.

This paper uses a dynamic panel of 61 Islamic banks from 12 Organization of Islamic Cooperation (OIC) countries covering the period between 2016 and 2018.

This paper finds that the empirical evidence examined shows that corruption does affect the profitability and soundness of Islamic banks.

The value of this paper is to emphasize further understanding of corruption behaviour on Islamic banking in Islamic countries. This paper contributes to filling the gaps in the current literature on corruption and Islamic banking. Existing literature has only focussed on either profitability or soundness of Islamic banking, whereas this paper analyses the impact of corruption levels for both performance measurements simultaneously.

The purpose of the study is to examine the relationship between the board of directors (BODs) and the Shariah board (SB) and assess its impact on the financial soundness of Islamic banks (IBs).

The authors use a regression model to test the effects of the relationship between the BOD and the SB on the financial soundness of IBs by applying a panel data set of 61 IBs, covering 18 countries from 2008 to 2014. The dependent variable is the Z-score indicator. To test the robustness of the results, the authors use dependent variables other than the Z-score [A rating of Capital adequacy (C), Asset quality (A), Management (M), Earnings (E), Liquidity (L), and Sensitivity (S) (CAMELS)] for 2018.

The results show that meetings between directors and SB members significantly reduce the financial soundness of IBs. The relationship between the BOD and the SB increases conflicts of interest and agency costs. However, a representation of the SB at the BOD meetings and vice versa does not affect financial soundness. The Accounting and Auditing Organization for Islamic Financial Institutions and the Islamic Financial Services Board corporate governance standards do not require the presence of the SB representative at the BOD meetings or vice versa, which justifies the results.

This study attempts to fill gaps in the literature by investigating the impact of meetings between the SB and the BOD on the financial soundness of IBs across the world. The results suggest that the BOD’s frequent interference in the affairs of the SB can have adverse effects on IBs and should be avoided.

The authors depart from the previous literature by using three new characteristics that link the BOD to the SB. Methodologically, the authors use three new measures to evaluate this relationship and its effect on the financial soundness of IBs. This study is unique because it explores the comparative impacts of the presence of a SB representative at the BOD meetings and a director at the SB meetings and meetings between the two governing boards of IBs.

This paper aims to empirically assess the contribution of Islamic banks toward the financial stability of Pakistan. For this, the authors investigate the relative financial strength of Islamic banks and their contribution toward the financial stability. They also examine the relationship between the competitive conduct of banks and banking system stability.

The authors use quarterly data of ten conventional banks, four full-fledged Islamic banks and six standalone Islamic branches of conventional banks of Pakistan for the period 2006-2012. The z-score has been computed and used as the measure of stability of banks and the random effects estimator applied to quantify the impact of bank-specific variables and macroeconomic indicators on the financial stability. The empirical framework used in the paper enables the authors us to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks. To check the robustness of the results, the authors have estimated several models with different specifications.

The regression results indicate that income diversity, profitability ratio, loan to asset ratio, asset size and the market concentration ratio of banks have significant effects on the stability of banks. Comparing Islamic and conventional banks, notable differential effects of the empirical determinants of financial stability for Islamic and conventional banks have been observed. The results suggest that Islamic banks have performed better as compared to conventional banks and contributed more effectively in the stability of financial sector. Overall, the results depict that the contribution of Islamic banks toward the financial stability has been reasonable and prospective.

The empirical results of the paper are very useful not only for banks’ managements but also for the investors, bank customers and policymakers. Specifically, the findings help in enhancing our understanding as to how the bank-specific variables and macroeconomic indicators are related to the financial stability of the banking system. The results also help understand the role of both Islamic and conventional banks in the financial stability. Further, the results suggest that the financial soundness can be enhanced by creating healthy competition in the banking industry. The results about macroeconomic indicators imply that protective measures are required to intensify (mitigate) the positive (negative) effect of gross domestic product (inflation) on banks’ financial stability.

This paper provides an overall comparative analysis of financial stability of both Islamic and conventional banks of Pakistan. First, the paper computes the z-score for each bank included in the sample, and then, it performs the regression analysis to study how bank-specific variables and macroeconomic factors are related to the financial stability of banks. Unlike the previous studies, our empirical framework enables the authors to examine the differential effect of each underlying variable on the financial stability across Islamic and conventional banks.

The purpose of this paper is twofold. First, it attempts to determine the factors that influence the stability of Islamic and conventional banks. Second, it focuses on the relationship between the regulatory capital and bank soundness.

Thus, the authors use the Z-score to assess the stability of Islamic and conventional banks operating in the Middle East and North Africa region over the period 1999 to 2014.

The comparative analysis reveals that Islamic banks seem to be less stable than their conventional peers. With regard to the determinants of bank stability, the findings suggest that the regulatory capital represents the primordial factor that reinforces the soundness of banking systems. The authors also find that bank stability depends on both bank-specific variables as well as macroeconomic and institutional variables. Interestingly, the corruption level turns out to have a significant negative effect on financial strength in the both types of banks.

The authors believe that investigating the relationship between regulatory capital and the failure risk in a comparative study between Islamic and conventional banks deserves a particular attention and looks very interesting because it will allow them to identify the difference between the factors explaining the failure risk of each type of banks. The authors also believe that the analysis of the relationship between corruption and bank stability is very interesting because corruption can be seen as an example of moral hazard which forces Islamic banks to use non-PLS instruments.

This study aims to investigate the relationship between political instability and the performance of Islamic banks in emerging countries.

For a data sample of 93 Islamic banks in 20 emerging countries during the period from 2011 to 2016, the authors identify indicators that matter most for the activities of Islamic banks.

The study finds that a stable government and law and order are positively correlated with the health of Islamic financial institutions. On the other hand, corruption and military involvement in politics can create an unstable environment for businesses, leading to uncertainty and risk. The study also reveals that Islamic banks operating in regions or communities with lower risk of socio-economic conditions tend to exhibit higher levels of profitability.

Overall, the study provides valuable insights into the impact of political instability on Islamic banks in emerging countries.

The financial crisis at the end of the past decade resulted in downturns in stock markets and the collapse of many large banks around the world. It encouraged economists worldwide to consider alternative financial solutions. Attention has been focused on Islamic finance as an alternative model. This study examines the performance of Islamic banks in 10 Middle Eastern and North African (MENA) countries over the period of 2005–2010.

It is an intertemporal analysis where it compares the profitability, liquidity, risk and solvency, and efficiency of 43 Islamic banks before and after the financial crisis.

The results show that the financial crisis negatively affected the performance of Islamic banks. The profitability and liquidity of Islamic banks in Gulf Cooperation Council (GCC) countries decreased drastically after the crisis. Islamic banks in non-GCC countries were efficient and more profitable compared to GCC countries. However, they took excessive risk during and after the financial crisis. The chapter concludes that Islamic financial institutions are not immune from the effects of the global recession.

The financial crisis has led to a greater recognition of the importance of liquidity risks. Reinforcing regulations and setting up a strong liquidity management framework are needed to improve the Islamic financial industry.