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Given the relative importance of the Shari’ah supervisory boards (SSBs) in Islamic banks’ (IBs’) performance, this study aims to examine the impact of SSB diversity on IBs’ performance from the stakeholders’ perspective in the context of Pakistan.

Random-effects model and generalized method of moment are used to investigate the impact of SSB diversity on IBs’ performance across a panel data of 22 Islamic banks in Pakistan from 2005 to 2020 inclusive.

The findings of this study show that SSB size, SSB relevant educational background diversity, bank’s size and bank’s stability have a positive impact on IBs’ performance. In contrast, SSB age, nationality and cross-membership diversities have a negative impact on IBs’ performance. Moreover, SSB gender, tenure and general educational diversities have no significant impact on IBs’ performance.

SSB diversity and IBs practices are different across different jurisdictions. This study is conducted on IBs in Pakistan because of data constraints; thus, the results of this study may not be generalizable to other countries' IBs.

In structuring the SSBs’ framework, the regulatory authorities and policymakers should consider mandating an ideal SSB size and hiring relevant qualified members with low cross-membership to improve IBs' performance. Thus, the structure potentially attracts Muslim stakeholders, enhances their satisfaction and improves IBs' performance.

Having diversified members in the SSB, IBs equally benefit both individual and group stakeholders in society. Diversity in SSB members enhances IBs' performance and the social welfare of various stakeholders in society.

To the best of the authors' knowledge, this is the first empirical research that examines comprehensively the impact of SSB structural and demographic diversities on IBs' performance in the context of Pakistan. This paper contributes to the unique Shari’ah governance structure in the context of Pakistan. Additionally, this study may serve to assist IBs’ stakeholders in better comprehending the SSB practices of IBs in Pakistan.

This study aims to shed light on Shari’ah supervisory boards (SSBs) and the possibilities of Islamic banks to reduce the tax avoidance. Performance and Shari’ah compliance have been extensively studied; however, tax avoidance remains a challenge.

SSB characteristics, based on resource dependence theory, influence tax avoidance, including SSB size, educational level, expertise, reputation, remuneration and turnover. The samples were obtained from Islamic banks in Indonesia and Malaysia (2010–2020) using the data panel method.

Islamic banks avoid taxes through the effective tax rate and book tax difference. SSBs who have more expertise play a role in investigating the complexity of tax avoidance, and SSB reputation, who is a member of the Islamic bank regulator, understands immorality, resulting in reduced tax avoidance. Moreover, the recruitment system has been effective, as SSBs with more expertise have become more prevalent. Meanwhile, SSB from a Shari’ah background works only in regulated areas, simplifying Shari’ah compliance, in particular, attestation of financial reporting. A heavy workload is created by cross-membership, resulting in the neglect of the immoral value of tax avoidance. The calculation of tax avoidance also includes remuneration and bank assets.

Given the uniqueness of Islamic banks contributing to social welfare, tax regulators need to review the appropriateness of fees that can be treated as taxes. Tax regulators can join hands with Islamic bank regulators on this review.

To the best of the authors’ knowledge, this study is one of the first to examine the characteristics of SSBs and Islamic banks on tax avoidance. Separating Islamic banks by country enriches the analysis.

This paper aims to examine the impact of Shari’ah supervisory boards (SSBs) on the performance of Islamic banks (IBs). It also tests whether SSBs’ attributes affect the performance of IBs. Based on a sample of 1,803 Islamic bank-year observations from 82 banks in 15 countries over the period 1993-2014 and controlling for factors known to affect bank performance, this study reveals a robust and significant positive relationship between SSBs and Islamic bank performance. This study also shows that the characteristics of SSBs affect the performance of IBs. This research reveals how SSBs influence the performance of IBs, as well as the processes and roles SSBs use to ensure Shari’ah compliance in business transactions.

The purpose of this study design is to relate SSB presence, size and diversity to financial performance using three techniques. The first technique is a multivariate data analysis that analyzes data arising from more than one variable. The second technique is a clustered regression (clustering by bank), which corrects for serial correlation and produces unbiased t-statistics. Because this sample is drawn from panel data, it is expected serial autocorrelation of the independent variables and error term within banks. In cases where within-company correlation exists, t-statistics based on average regression coefficients from year-by-year regression are upwardly biased and potentially severe (Peterson, 2009). Therefore, this study uses a technique that agrees with Stock and Watson (2002), who show that the standard method of calculating heteroskedasticity-robust standard errors for the fixed-effects estimator generates inconsistent variance estimates. Thus, using the clustered regression is consistent with the fixed-effects estimator. The third technique is a two-stage least-squares regression that helps build an instrumental variable for robustness tests purposes.

The findings suggest that large corporate boards and large SSBs are more efficient in dealing with different monitoring and advisory roles than small SSBs. Consequently, this suggests that increasing the size of corporate boards and SSBs should improve monitoring and advisory functions, management behavior and organizational performance.

It is possible that there is an upper limit to this benefit, however; we do not explore this limit, which therefore provides opportunities for additional research. Because Shari’ah compliance relates only to a rational legal framework of negative screening relegated to interest prohibition and limiting uncertainty. The interest prohibition and limiting uncertainty have not been investigated between the two samples due to data unavailability. In addition, limited accounting-based measures of financial performance may not accurately portray IB performance; hence, an additional market measure is implemented, which is Tobin’s Q.

Ultimately, these findings could help IBs improve their financial results by enhancing their internal and external governance mechanisms (Walsh and Seward, 1990). They provide a basis for developing larger, more diverse SSBs that are more focused on complying with Shari’ah and corporate governance. The results also have significant policy implications for improving firm-level corporate governance versus improving country-level institutional factors. Both views have their advocates. However, it is very difficult to reform the legal system in a short time. Still, this study shows that struggling IBs have a way to improve their corporate governance and simultaneously improve their financing environment.

This research contributes to the literature on the effects of SSBs on IBs’ organizational financial performance, processes and roles. It is the first to examine empirically the underpinnings of how SSBs affect organizational financial performance via agency theory and contingency theory.

This study aims to investigate the impact of Shari’ah and corporate governance on Islamic banks performance in Asia.

The study uses hand collected data set on Shari’ah and corporate governance variables of 79 Islamic banks of 19 countries of Asia, for the period of 2011-2016. Augmented Mollah et al. (2017) composite corporate governance index into Islamic corporate governance (ICG) index by incorporate Shari’ah board’s (SBs) attributes. Two types of statistical analysis were performed; descriptive statistics, sample t-test and panel random effects regression. The analysis was further sub-sampled by considering the supervisory vs advisory, GCC vs non-GCC and large vs small effects of Shari’ah and corporate boards on Islamic banks performance.

The results of the baseline model reveal that Shari’ah governance-related variables are more influential in determining the financial performance of the Islamic banks. The sub-sampled data findings illustrated some interesting facts. Shari’ah supervisory vs advisory boards regression results show that the ICG index was found significant in both the models. However, when SBs are weak the general board dominates in determining the performance. GCC vs non-GCC results show a relatively good governance in non-GCC countries. While, in case of large vs small Islamic banks, banks having high total assets demonstrates sound governance characteristics.

Independent, large and educated SB can play a significant role in removing the hurdles facing the Islamic banking industry and can also enhance stakeholders’ value.

This study enriches the understanding on Shari’ah governance, corporate governance and financial performance of Islamic banks in Asia.

The purpose of this paper is to understand current Shari'ah governance practices with the purpose of promoting greater understanding of some of the crucial issues and to provide relevant information in guiding the future development of Shari'ah governance system. The paper illustrates the state of Shari'ah governance practices in Malaysia, GCC countries (Kuwait, Bahrain, United Arab Emirates, Qatar and Saudi Arabia) and the UK by highlighting five main elements of good corporate governance that consist of independence, competency, transparency, disclosure and consistency.

Since the availability of secondary data on Shari'ah governance practices is very limited, a detailed survey questionnaire is generated for sourcing primary data from Islamic Financial Institutions (IFIs). The study utilizes descriptive analysis approach in extracting and analyzing the data and factual input derived from the questionnaire feedback.

The survey findings affirm that there are significant differences and diverse Shari'ah governance practices in the case countries. This position acknowledges that there are shortcomings and weaknesses to the existing governance framework which needs further enhancement and improvement.

The paper is a very useful source of information that may provide relevant guidelines in guiding the future development of Shari'ah governance practices in IFIs.

This paper provides fresh data and recent information on the actual Shari'ah governance practices of IFIs in three jurisdictions.

This purpose of this article is to examine the Shari'ah scholars' perception of the Shari'ah governance system in Islamic financial institutions (IFIs) particularly of its six major areas, namely, issues of Shari'ah governance; internal framework; roles and functions of Shari'ah board; attributes of Shari'ah board members on independence, competency and transparency and confidentiality; operational procedures and assessment of the Shari'ah board's performance.

The study conducted semi-structured interviews with Shari'ah scholars who are members of the Shari'ah boards in various IFIs. All interview questions were generated, structured and arranged in a way that all the data could be analysed easily through a coding and thematic approach.

The study discovers the different points of view demonstrated by the Shari'ah scholars who were interviewed on several issues, and they have also conceded that there are serious gaps and weaknesses prevalent in all the six major areas of Shari'ah governance. This position acknowledges that there are shortcomings and weaknesses to the existing governance framework which need further enhancement and improvement.

The study offers a useful source of information that may provide relevant guidelines to policymakers and practitioners for future development of Shari'ah governance practices in IFIs.

The study provides fresh data and significant information pertaining to the Shari'ah scholars' perspective on the Shari'ah governance system. This analysis of Shari'ah scholars' opinions of the Shari'ah governance system can also serve to enhance the literature on the topic.

The study aims to investigate the Shari’ah governance quality effectiveness, at the bank and national levels, on the value relevance of Islamic banks’ (IBs’) earning per share and book value per share.

Quantitative analyses are conducted using a panel of 40 listed IBs from 12 countries during 2012–2019. Data were retrieved from the Refinitiv Eikon database and banks’ annual reports.

The findings suggest that Shari’ah supervisory boards’ attributes negatively influence the value relevance of accounting information while the internal procedures positively impact it. The results also provide evidence of a complementary effect between Shari’ah governance mechanisms at the bank and national levels on the value relevance of accounting information.

IBs’ boards and managers need to be more aware of the role of Shari’ah governance and its impact on value relevance. The observed complementarity between Shari’ah governance systems at the bank and national levels may incite regulators to include comprehensive Shari’ah governance regulations in their best practices. Strengthening collaboration between regulators and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is also required to create an enabling environment for investors to rely on the AAOIFI accounting standards in their investment decision-making process.

Existing studies tend to ignore the effectiveness of Shari’ah governance quality at the bank level on value relevance. There is a similar lack of empirical research on the effectiveness of the centralized Shari’ah governance scheme on accounting issues.

The purpose of this study is mainly to comprehensively investigate the current practices of Islamic banks’ Shari’ah supervisory boards in the specific context of Yemen.

The study uses a qualitative approach in the form of in-depth interviews of a number of Shari’ah scholars active within the Yemeni Islamic banks.

The findings support the notion that Islamic banking still lacks regulations and standards, as the Yemeni Islamic banks are still following the minimum requirements and only apply the compulsory standards. Another key finding is that Islamic banks in Yemen apply similar principles in Fatwa issuance and Shari’ah compliance assurance, especially in referring to the different Madzhabs’ and scholars’ opinions because of the sensitivity of Yemeni community with regards to the Shari’ah compliance aspect. Finally, the procedure of Shari’ah review of the Islamic banks’ operations varied from the typical set of procedures to the loose ones in terms of the number of staff in the Shari’ah audit department and the application of a comprehensive survey or sampling to review the banks’ transactions.

This study provides some valuable recommendations to further enhance the Shari’ah supervisory practices not only in Yemen but also in similar settings.

To meet the philosophical underpinnings of Islamic financial institutions (IFIs), a sound shari'ah governance framework (SGF) for each and every IFI is vital. Establishment of a proper SGF is central for smooth and effective functioning of an IFI. In the periphery of shari'ah governance (SG), the role of Shari'ah Supervisory Boards (SSB) is considerably crucial. SSB constitutes one of the most important SG elements in a given IFI. One of the central objectives of SGF is to protect and boost the authenticity of IFIs among its stakeholders, which is instrumental for the resilience and growth of the industry. To achieve this, it is required that an end-to-end shari'ah assurance process is functionalised at IFIs. To this end, external shari'ah audit, which is a process of objectively evaluating the entire operations of an IFI from shari'ah perspective and ascertaining that all events are based on shari'ah principles, is of paramount significance.

This chapter summarizes the current practice of shari'ah governance framework of Islamic banking entities (IBEs) in Oman and the challenges faced by such institutions. The Central Bank of Oman (CBO) issued proper shari'ah governance framework enshrined in the Islamic Banking Regulatory Framework of CBO. The shari'ah governance framework shall contain shari'ah supervisory board, internal shari'ah reviewer, shari'ah compliance unit, shari'ah risk unit, and shari'ah audit unit. To strengthen the role of shari'ah, the CBO also issued a regulation for the establishment of High Shari'ah Supervisory Authority in CBO to harmonize opinions related to shari'ah matters among the IBEs. These elements are expected to perform an oversight role on shari'ah matters relating to Islamic banking business activities. This chapter also discusses the issues and challenges faced by IBEs in Oman, and proposed some improvement to the CBO to strengthen shari'ah governance framework in the Sultanate.