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1 – 5 of 5Sulaiman Abdullah Saif Al-Nasser Mohammed and Joriah Muhammed
In relation to the critical problem, this paper aims to present an understanding of the agency theory and the stakeholder theory from the perspective of the Islamic principles…
Abstract
Purpose
In relation to the critical problem, this paper aims to present an understanding of the agency theory and the stakeholder theory from the perspective of the Islamic principles. Indeed, a thorough examination of the theoretical background explaining corporate governance from the Islamic perspective is necessary to conduct research analysing corporate governance in Islamic banks.
Design/methodology/approach
The authors followed a critical review discussion; this method takes into consideration presenting important theories and comparing those theories with Islamic perspective.
Findings
The authors presented important arguments on the difference between ordinary theories to explaining corporate governance and Islamic perspective. The paper browsed into whether the Shariah Supervisory Board is a fit with the agency theory by explaining the agency theory and how it differs from the Islamic banking concepts. The paper involved an analytical review on stakeholder theory and presented a critique and the rationale as to why there is ample room for the Shariah Supervisory Board to be considered a fit with the stakeholder theory, as the Shariah Supervisory Board is an independent body influencing the firm.
Originality/value
The paper is of important value to those conducting research in the area of governance in Islamic banks; they may find it beneficial in terms of underlining theory building their research framework.
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Sulaiman Abdullah Saif Al-Nasser Mohammed and Datin Joriah Muhammed
The purpose of this paper is to investigate the performance of Islamic banks in developing countries from 2007 to 2010 which includes the period of the financial crisis by…
Abstract
Purpose
The purpose of this paper is to investigate the performance of Islamic banks in developing countries from 2007 to 2010 which includes the period of the financial crisis by empirically examining the way in which the macroeconomy affected Islamic banking performance (IBP) in developing countries. The empirical examination involves two approaches of measuring performance: Sharia-based and conventional-based performance measurement.
Design/methodology/approach
For this paper, the authors have utilized a Data Stream/Bank Scope database and data from the Bank Negara Malaysia (Malaysian Central Bank) to collect a panel set of annual financial information for Islamic banking from the year 2007-2010. The initial sample covers 34 Islamic banks from developing countries that are listed on the International Islamic Service Board. Furthermore, the authors adopted only those listed Islamic banks to tackle the data availability issue. The authors’ final sample comprised 136 observations with complete data as the numbers of Islamic banks in developing countries are low in comparison to their conventional peers. The financial crisis dummy follows America’s commonly used National Bureau of Economic Research timeline for the financial crisis. The authors also used the method of a generalized least square (GLS) method of pooled panel data analysis regression model. The rationale for employing the GLS technique was made on the basis of the ability of GLS to give less weight to the error term that is closely clustered around the mean, to improve the goodness of fit and to remove autocorrelation compared with normal, random, and fixed effect models.
Findings
The authors of this paper found that the macroeconomic factors reflected in gross domestic product, gross domestic product growth, and inflation rate have a significant positive relationship with the return on assets. In addition, a significant negative relationship was found between the financial dummy and IBP in developing countries. On the other hand, it failed to find evidence of a relationship between the macroeconomic factors and performance including the legal system and the financial crisis dummy, when the performance is reflected by the Zakat ratio. The result embedded that the financial crisis had an impact on the performance of Islamic banks in developing countries when viewed from the conventional banking perspective. The financial crisis played a role in reducing the profitability of Islamic banks which is consistent with a previous study by Hasan and Dridi (2011). However, in the view of Sharia, the financial crisis did not have any effect on IBP; even the macro factors did not have any effect on the level of performance.
Research limitations/implications
There are possible explanations for these contradictory coefficient signs. First, the contradictory signs of the coefficient for the same independent variable that was regressed with different dependent variables show that researchers would need to take caution in using the right indicators when measuring IBP. Conventional indicators bring different results in comparison to Islamic indicators (Badreldin, 2009; Mudiarasan. Kuppusamy, 2010; Zahra and Pearce, 1989). Second, Richard et al. (2009), having reviewed performance measurement-related publications in five of the leading management journals (722 articles between 2005 and 2007), suggested that the past studies reveal a multidimensional conceptualization of organizational performance with limited effectiveness of commonly accepted measurement practices. Accordingly, these studies call for more theoretically grounded research and debate for establishing which measures are appropriate in a given research context. Today, there is a general consensus that the old financial measures are still valid and relevant (Yip et al., 2009). However, these need to be balanced with more contemporary, intangible, and externally oriented measures. It has been argued that various researchers working in their own disciplines using functional performance measures (such as market share in marketing, schedule adherence in operations and so on) ought to link their discipline to focused performance measures of overall organizational performance.
Practical implications
Islamic banking has unique characteristics in comparison to conventional banking and this paper examines the differences between the two and also investigates the resilience of Islamic banks during a period of economic turbulence. Furthermore, due to these unique characteristics, a comparison cannot be made by using the conventional performance measures alone. In addition, amid the in-depth studies examining the resilience of Islamic banks during periods of economic crises, there are instances of theoretical disagreement in the extant empirical literature examining finance and economics. In that regard, the majority of the existing literature is either based on advanced markets or countries where the majority of the population practices the faith of Islam, and little is known about the performance of Islamic banking from the pooled emerging markets; particularly in developing countries.
Originality/value
Introducing Zakat as a performance measurement in Islamic banking context relating it to macroeconomic factors enhances the thinking of new research in Islamic theory about bank performance.
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Sulaiman Abdullah Saif Al Nasser, Datin and Joriah Muhammed
The purpose of this paper is to review the history of Islamic banking in Malaysia from 1963 until 2010.
Abstract
Purpose
The purpose of this paper is to review the history of Islamic banking in Malaysia from 1963 until 2010.
Design/methodology/approach
To review the history of Islamic banking in Malaysia, data have been gathered from different articles, books and reports about the Islamic banking system in Malaysia.
Findings
The paper found that Malaysia as an Islamic country has an outstanding infrastructure to support the establishment of an Islamic banking hub in the Islamic region.
Originality/value
The paper shows that Malaysia was of the first countries to take a systematic planning approach to develop the Islamic finance system in the region. Islamic banking systems in Malaysia are growing rapidly and progressively, in spite of some other countries wishing to be ahead of Malaysia, such as Singapore and the UK.
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Sulaiman Abdullah Saif Alnasser and Joriah Muhammed
The purpose of this paper is to draw an analytical review on corporate governance from the Islamic perspective, addressing the importance of understanding governance for Islamic…
Abstract
Purpose
The purpose of this paper is to draw an analytical review on corporate governance from the Islamic perspective, addressing the importance of understanding governance for Islamic institutions.
Design/methodology/approach
The study follows a browsing method that takes into consideration the difference between normal corporate governance in conventional banking and comparing that to Islamic banking.
Findings
It was found that it is very important to take into consideration the corporate governance in Islamic banks because it might help to draw the right image about the organization. In particular, how the Shariah Supervisory board functions and how it could be linked to the Islamic banking process.
Originality/value
This paper is one of few papers that highlight the importance of studying corporate governance for Islamic banks. The paper is of value in describing governance in Islamic institutions and how there are many issues under the investigation process, especially issues related to the Shariah Supervisory board and its functionality.
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