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This study aimed at exploring the differential effects of different corporate governance (CG) indicators on risk management practices in Islamic financial institutions (IFIs) and conventional financial institutions (CFIs) of Pakistan. It also investigated the moderating role of institutional quality (IQ) in shaping the effects of CG practices on financial institutions of Pakistan.

A sample of 57 financial institutions including commercial banks, insurance companies and Modarba companies over the period 2006–2017 is used to carry out the empirical analysis. The authors applied the robust two-step system-generalized method of moments estimator, which is also called the dynamic panel data estimator. They also built the PCA-based composite index of CG and IQ by using different indicators to investigate the moderating role of IQ. They used three proxies for risk taking, five for CG and one for Shari’ah governance. To test the validity of the instruments, they applied the Arellano and Bond’s (1991) AR (1) and AR (2) tests and the J-statistic of Hansen (1982).

The results provided strong evidence that several individual characteristics of CG and the composite index are significantly related to the operational risk, the liquidity risk and the Z-score (a proxy for solvency risk). The results also revealed that IQ significantly and substantially contributes in reducing the level of risks. Finally, the estimation results indicated that the effects of CG on risk management are significantly different at IFIs and CFIs. This differential impact is mainly attributed to the fundamental differences in business models, operational strategies and contractual obligations of both types of institutions.

The findings of this study are important for enhancing our understanding of how CG relates to risk taking in Islamic and conventional financial services industries and how good quality institutions are important for formulating the governance effects on the risk-taking behavior of financial institutions. The findings suggest that a suitable size of board should be chosen to manage the risk effectively. As the findings show that the risk-taking behavior of IFIs differs from that of CFIs, the regulators and international standard setting bodies should tailor the regulatory frameworks accordingly.

This paper is different from the existing studies in four aspects. First, to the best of the authors’ knowledge, this is the first empirical investigation in Pakistan, which does the comparison of IFIs and CFIs while examining the impacts of CG on risk management. Second, the paper constructs the composite index of CG by considering several different indicators of governance and examines the combined effect of governance indicators on risk management process. Third, this paper adds to the growing literature on the role of IQ by investigating whether it acts as a moderator between CG structures and risk management and if yes, then whether this moderating role is different for IFIs and CFIs. Finally, the paper builds upon the existing research work on the CG effects for different types of financial institutions by proposing a single regression based analytical framework for comparing the effects across two different types of institutions, harvesting the benefits of higher degrees of freedom and avoiding/minimizing the measurement error.

The most crucial challenge facing Islamic Financial Institutions (IFIs) is the full compliance of their activities with shari'ah principles. The complexity of IFIs requires Otoritas Jasa Keuangan (OJK, Indonesian Financial Services Authority) to adopt a good shari'ah governance framework to address shari'ah risks of Islamic banking and financial institutions (IBFIs). However, the current shari'ah governance structure in Indonesia is far from ideal compared to the international best practice. This chapter proposes a new shari'ah governance framework by involving shari'ah supervisory board authority (Otoritas Dewan Pengawas Syariah) under the commissioners of OJK to oversight, regulate, and supervise the shari'ah matters for IBFIs in Indonesia. The chapter discusses the challenges in adopting this new framework. The chapter concludes that the current shortcomings of the proper shari'ah governance framework for shari'ah supervision and regulation requires a new shari'ah board authority under the commissioners of OJK who has full authority over shari'ah matters.

It has been observed that the practices of corporate governance in Islamic financial institutions (IFIs) do not sufficiently address the rights of unrestricted investment account holders (UIAHs). Given that such account holders are generally the ones who bear the risk of the performance of the investment pool, the purpose of this paper is to investigate the relationship between corporate governance practice and the safeguarding of the interests of UIAHs as major stakeholders.

A qualitative research methodology is applied to a sample of 16 managers from 12 Islamic financial institutions from Kuwait, Bahrain, UAE and Malaysia. A theoretical model built around the GC principles featured in the King report underpins the research design.

The findings reveal that the current practices implemented by IFIs in protecting the rights of UIAHs are not effective enough, in the light of standard corporate governance principles. It was also found that lack of responsibility, accountability and independence in decision making, as corporate governance principles, is contributing to the ineffectiveness of current practices in the investigated IFIs.

The major limitation of the research is the small size of the sample used. Hence, the work reported here must be considered as exploratory and a further study employing a larger sample is recommended as future research.

A number of recommendations for corporate governance practice in IFIs aimed at the unique relationship between IFIs and UIAHs are put forward.

The originality and the value of this paper rest on its topic which, to the best of the researchers' knowledge, has not been investigated empirically before. Hence, the authors believe it will be of value not only to academics but mostly to practitioners in IFIs.

This study aims to assess the extent of the mandatory and voluntary Shariah compliance disclosure in the Shariah Committee Report of Islamic financial institutions (IFIs) in Malaysia. The study highlights the accountability and transparency of the Shariah Committee members to provide full disclosure of relevant Shariah compliance information to the stakeholders.

The study adopts content analysis to quantify and code the number of sentences in the Shariah Committee Report disclosed in the 2016 annual report of 47 IFIs in Malaysia. The extent of Shariah compliance disclosure in the Shariah Committee Report is measured based on the Standard (S) and Guidance (G) items outlined in the Shariah Governance Framework (SGF) as well as the Financial Reporting for Islamic Banking Institutions and takaful operators guidelines issued by Bank Negara Malaysia (BNM) as the reference.

The findings indicate that majority of IFIs complied with the minimum mandatory disclosure requirement based on the Standard (S) items in the Shariah Committee Report as required by the SGF. Highest information on the purpose of Shariah Committee engagement and scope of work performed is disclosed to the stakeholders in almost all IFIs. Only two prominent full-fledged Islamic bank and Islamic banking business in development financial institutions have shown highest accountability to go beyond the minimum disclosure requirement. This includes disclosing higher voluntary information on Shariah governance processes in the Shariah Committee Report of these two IFIs.

This study adopts the SGF (Bank Negara Malaysia, 2010), Financial Reporting for Islamic Banking Institutions (Bank Negara Malaysia, 2016) and Financial Reporting for Takaful Operators (Bank Negara Malaysia, 2015) as the reference to develop the measurement of Shariah compliance disclosure in the Shariah Committee Report. These guidelines issued by BNM are still effective during the period of study, i.e. the year 2016.

The findings contribute towards the relevance for BNM as the regulator to enhance the current disclosure requirement in the Shariah Committee Report as stated in the SGF especially in Islamic windows and takaful operators. The main argument of this paper is that the more information being disclosed in the Shariah Committee Report will lead to better Shariah assurances. The issuance of Shariah Governance Policy Document in 2019 is expected to enhance the credibility, accountability and transparency of the Shariah Committee members concerning their oversight responsibility towards Shariah matters in IFIs’ business operations.

After five years since the issuance of the SGF in 2010, further study on the extent of mandatory and voluntary Shariah compliance disclosure is important to highlight the accountability and transparency on the implementation of the Shariah governance across various types of IFIs in Malaysia.

Islamic financial institutions (IFIs) have gained popularity recently in the Islamic countries and countries with mixed religious practices. Due to its profit–loss sharing partnership contracts and integrated social and risk management practices, IFI can finance financially distressed firms, and firms with specialized sectors, better than the traditional development financial institutions (DFIs). Should they need large amount of financing, both existing financially unsuccessful industries and new development initiatives can be financed with Sukuk issuance. This chapter investigates the growth of these two industries – IFIs and DFIs, with respect to various indicators, compares the initiatives that establish the dominating character of IFIs over the DFIs, discusses the reasons behind such turnaround, and the future of DFIs. IFIs have been enjoying a superior growth in assets and deposits, asset quality, risk management, and profitability over the DFIs in Malaysia. Among many, the study identifies regulatory incentives to IFIs, inefficient management of DFIs, and most importantly, a paradigm shift through Islamic finance as primary reasons behind gradual disappearance of DFIs. The next generation of IFIs will emerge as the Islamic Development Financial Institutions and may takeover the role that is played by the DFIs most recently.

The aim of this paper is to discuss the similarities and differences of both conventional and Islamic financial institutions from various institutional perspectives.

This conceptual paper describes the insights held by the financial institution theory which is discussed from the perspectives of the economics of the financial institution, legal environment, the political aspect of an institution, the philosophical underpinning, the components of institution and also the ethical role of institution. Then, this paper will proceed to justify the similarities and differences that have been observed between both institutions.

Discussions in this paper will reveal that specifically specific similarity is prevalent on the nature of the supervisory role. The differences between both institutions from the aspects of business organization, economic roles and law of origin have also been found.

The similarities and differences that are established on both institutions will affect the structure of the financial contract and the design of financial systems.

The paper will contribute a new knowledge specifically on the design of the Islamic financial contract based on Shariah law at the initial phase.

The purpose of this paper is to explore whether there is any difference in the management accounting systems (MAS) of conventional and Islamic Financial Institutions (IFIs) in Malaysia.

The paper was based on a survey of 45 conventional and IFIs listed on the Malaysian Central Bank's web site. The respondents were the chief financial officers (CFO). Post‐survey semi‐structured interviews were also conducted with eight respondents to gain further insights into the survey findings.

The survey results indicate that IFIs use MAS information that is broader in scope, more timely, more integrated and more aggregated than conventional financial institutions. The post‐survey interviews provide deeper and contextualised insights into this issue. The interview findings illustrate that IFIs normally develop and adopt an integrated accounting and enterprise system. Within this comprehensive enterprise system, the management accounting function is integrated with other functions of the organization.

Since this study was conducted in the context of Malaysian financial institutions, the results may not be generalizable to other organizations. The findings of this study highlight the importance for IFIs to have integrated enterprise systems. Besides assisting in complying with Shari'ah and regulatory requirements, the integrated systems also support better decision making.

The paper fills a gap in the literature, as very few studies have examined the issue of management accounting in financial institutions. The paper is also one of the limited studies that explore the issue of MAS in IFIs.

To wipe out the criticism of being a replica of conventional financial institution, Islamic financial institutions (IFIs) need to comply with Islamic principles not only on financial side but also while branding and marketing their products and services. This will bring the coherence between their overall market image and core business activities. This paper aims to discuss in detail the Islamic marketing traits relevant to the IFIs for positioning and offering their products.

This study follows the research design based on reviewing existing sources of Qura’an and Hadith, the secondary research literature on this novel topic and substantial intellectual discourse with the field experts.

It is criticized that IFIs lack the spirit of Islamic values for marketing and branding a commercial business entity. Therefore, this paper outline the differences between Islamic and conventional marketing. Also, it contributes to explain the traits of Islamic marketing mix relevant to the IFIs based on Islamic established principles.

This study gives valuable practical guidelines for the marketing policymakers of Islamic financial institutions. Islamic marketing mix; product, price, place and promotion, related strategies can be designed and branded keeping the true spirit of Islamic marketing values intact.

This study is practically important for Islamic financial intuitions to sustain their “Islamic” image by making sure of Islamic principles in their product development, pricing, promotions and distribution.

The socioeconomic system is the brand of Islamic economics and finance. IFIs being the stakeholders of this brand can contribute to the well-being of the society by enhancing their acceptability with the help of divine image and operations.

Literature on practical Islamic marketing approach in particular to the IFIs is very limited. This study gives comprehensive findings on all the major aspects of marketing based on Islamic values for Islamic financial institutions.

The aim of this paper is to review the different steps of development of Shariah governance system and to discuss the different practices of Shariah governance in Islamic financial institutions internationally.

The paper has a particular focus on the other contributions of relevant literature and existing laws and regulations for Islamic financial institutions which provides a reflective synthesis on practical work of Shariah governance system across different jurisdictions.

The main attention of this paper is Islamic financial institutions and a key issue arising is that the typical structure, functions, duties and responsibilities are different from country to country.

The paper put forward various suggestions to the regulatory authorities and to the Islamic Financial Services Board to enhance the Shariah governance system and to standardize the different practices of Shariah governance worldwide.

The originality and the value of the paper lie in its critical review of current Shariah governance practices worldwide. As well, some key issues pertaining to Shariah governance in Islamic financial institutions are addressed to encourage further investigation by academics and practitioners in the field.

The purpose of this paper is to describe the role and responsibilities of Shari’ah auditors in Islamic financial institutions (IFIs) in the auditing process in the IFIs, to highlight capacity building challenges in the Shari’ah auditing industry.

The authors used a legitimacy theory to understand linkages between demand for Shari’ah audit and the role of Shari’ah auditors in IFIs complemented with the review the Accounting and Auditing Organization of Islamic Financial Institutions and Auditing Standard for Islamic Financial Institutions to understand the Shari’ah audit work requirements from an Islamic perspective.

Shari’ah auditing is an emerging field of investigation. There is no doubt that conventional auditing has a significant influence on the auditing frameworks used in IFIs. Western auditing practices are undergoing a metamorphosis to meet the needs of stakeholders in the Islamic economic system. The role and responsibilities of auditors in IFIs are much broader than those found in conventional banks in relation to an examination of a variety of contracts, product structures, transactions reporting, preparation of financial statements, reports, marketing circulars and any other legal documents, which are pertinent to IFIs’ operations.

We posit that the absence of a proper Shari’ah auditing framework and standards attuned to the needs of an Islamic economic system could dampen the future of the Islamic finance industry. The regulators and management of IFIs should meet the expectations of the stakeholders to whom they owe a duty of care by selecting competent professionals for auditing work, along with transparent policies and systems.

This paper presents an attempt to establish auditors’ roles and responsibilities from an Islamic perspective.