Search results
1 – 10 of 323Prasojo Prasojo, Winwin Yadiati, Tettet Fitrijanti and Memed Sueb
The purpose of this study is to examine the relationship between intellectual capital, sharia governance and Islamic bank performance based on the maqasid sharia index, as well as…
Abstract
Purpose
The purpose of this study is to examine the relationship between intellectual capital, sharia governance and Islamic bank performance based on the maqasid sharia index, as well as the moderating effect of sharia governance on the relationship between intellectual capital and maqasid sharia index.
Design/methodology/approach
Dynamic panel regression is used with the two-step generalised method of moments with data from the Bankscope database for 2014–2018.
Findings
The results show that higher intellectual capital efficiency improves Islamic bank performance based on maqasid sharia. Larger board sizes are also found to improve Islamic bank performance. By contrast, higher sharia supervisory board quality and larger independent boards can reduce Islamic bank performance. In the moderating relationship, sharia governance is proven to moderate the relationship between intellectual capital and Islamic bank performance.
Research limitations/implications
This study used a sample that is restricted to Islamic bank and only used value-added intellectual coefficient to measure intellectual capital. Thirdly, the quality of the sharia supervisory board only involves the presence, size, expertise and doctoral qualification of the sharia supervisory board.
Originality/value
This research: analyses the relationship between intellectual capital, sharia governance and Islamic bank performance in one research framework; uses maqasid sharia index-based Islamic bank performance benchmarks; and examines the moderating effect of sharia governance on the relationship between intellectual capital and maqasid sharia index.
Details
Keywords
This article aims to explore legal challenges regarding the regulation and supervision of Islamic Fintech and to construct Sharia compliance regulations to strengthen the…
Abstract
Purpose
This article aims to explore legal challenges regarding the regulation and supervision of Islamic Fintech and to construct Sharia compliance regulations to strengthen the supervision of Islamic Fintech operation.
Design/methodology/approach
This type of research is legal research, adopting the statute approach, comparative approach, and conceptual approach. The focus of the study is Indonesia with comparative studies with Malaysia and the United Kingdom.
Findings
Malaysia, Indonesia, and the United Kingdom are all on the top five countries in the Global Islamic Fintech (GIFT) Index. The list comprises countries that are most conducive to the growth of the Islamic Fintech market and ecosystem. However, weak supervision and low Sharia compliance are still becoming prominent challenges in the implementation of Islamic Fintech, while Sharia compliance is the core principle for Islamic finance regulation. Another finding is that a good ecosystem of Islamic Fintechs needs supportive regulations and policies, a Sharia Supervisory Board, and standards of Islamic Fintech Shariah governance.
Research limitations/implications
This study examines the regulation and supervision of Islamic Fintech in Indonesia, Malaysia, and the United Kingdom countries whose Islamic Fintech industry is growing rapidly.
Practical implications
This study is a strong reference for countries with potential Islamic finance, especially when they are constructing the Sharia compliance regulations to strengthen the regulation and supervision of the Islamic finance industries.
Social implications
Sharia compliance regulations can be a subsystem in the Islamic financial ecosystem to encourage Sharia economic growth in various countries.
Originality/value
To ensure Sharia compliance, it is recommended to take some steps: (a) creating the Sharia compliance regulations; (b) creating the Sharia supervisory boards; and (c) standardizing the Sharia governance of Islamic Fintech.
Details
Keywords
Muhammad Taufik, Rifqi Muhammad and Peni Nugraheni
This study aims to examine how sharia supervisory board (SSB) characteristics are determinants of the maqashid sharia performance (MSP) of Islamic banks (IBs) and how MSP has…
Abstract
Purpose
This study aims to examine how sharia supervisory board (SSB) characteristics are determinants of the maqashid sharia performance (MSP) of Islamic banks (IBs) and how MSP has implications for profitability and for profit-sharing investment account holders (PSIAHs).
Design/methodology/approach
MSP is ascertained by semi-structured interviews. The SSB characteristics measured are size, cross-membership, education level, expertise, reputation, rotation and remuneration. Annual reports of Indonesian and Malaysian IBs from 2010 to 2018 are analysed using panel data regression.
Findings
In Indonesia, SSB education level attenuates MSP, while other characteristics have only minor influence. However, in Malaysia, SSB size, education and reputation reinforce MSP, while others are ineffective. MSP in both countries is pseudo-Islamic; so their customers ignore religiosity. However, MSP in Malaysia can improve profitability because sharia assurance is more transparent; meanwhile, MSP in Indonesia cannot improve profitability because sharia assurance is less transparent.
Practical implications
In order for MSP to improve in Indonesia, the regulators need to increase SSB size, reduce cross-membership and arrange the format for sharia assurance in SSB reports, while IBs need to increase SSB education and expertise.
Originality/value
MSP is constructed in accordance with legal and social requirements to achieve IBs’ Islamic, economic, social and ethical objectives. Resource dependence theory is used to evaluate SSB, while PSIAH and profitability are investigated to demonstrate the impact of MSP. Finally, comparing SSB capabilities in Indonesia and Malaysia could be beneficial to regulatory and IB policies.
Details
Keywords
The Sharia governance is topic that has generated much interest in the literature of Islamic banking industry. The Sharia supervision plays an essential role in the governance of…
Abstract
Purpose
The Sharia governance is topic that has generated much interest in the literature of Islamic banking industry. The Sharia supervision plays an essential role in the governance of Islamic banks. The Sharia Board (SB) which is peculiar to Islamic banks is considered as the principal component of the Sharia governance framework. The purpose of this paper is to examines the link between Sharia compliance, the form of Sharia supervision and the effectiveness of Sharia governance.
Design/methodology/approach
This paper compares two model of Sharia governance framework, the first is the decentralized model in the Gulf Cooperation Council (GCC) and the second is the centralized model in Malaysia.
Findings
The independence of the SB in their mission of supervision and the consistency of Sharia ruling are the principal components of an efficient Sharia governance structure. Centralized Sharia governance system, basically in Malaysia, seems to be beneficial to the industry in term of effectiveness and credibility of the Islamic banks.
Research limitations/implications
The research focuses exclusively on the qualitative analysis about the SB and Sharia governance in Islamic countries.
Practical implications
The model of centralization is able to strengthen the position and the independence of SB and can better examine the subjects of divergences between the whole of the SB in order to promote, in the long term, the consistency of Fatwas and interpretations between banks and regions.
Originality/value
To the best of our knowledge few studies have examined this subject in a comparative discussion between MENA and Southeast Asia region. This paper contributes to the literature on Sharia governance by considering the difference between these two regions in term of supervision model of Sharia rules and principles and its application in Islamic banking.
Details
Keywords
This paper is an empirical study of the effect of the characteristics of the Sharia supervisory board (SSB) on the financial performance of Islamic banks.
Abstract
Purpose
This paper is an empirical study of the effect of the characteristics of the Sharia supervisory board (SSB) on the financial performance of Islamic banks.
Design/methodology/approach
Using 42 Middle East and North Africa (MENA) Islamic banks outside the Gulf Cooperation Council (GCC) and non-Islamic countries during the 2011/2018 period, a random-effects generalized lease square method for the regression analyzes is applied.
Findings
The obtained results show that the characteristics of the SSB affect the financial performance of Islamic banks. The results also affirm that a large-sized board of directors and the number of SSB meetings improve banking performance while the cross-mandate seems to destroy it. On the other hand, the SSB members’ competence and reputation and the proportion of women sitting in SSB have no impact on the financial performance of Islamic banks.
Research limitations/implications
This paper gives a comprehensive literature survey on the effect of the characteristics of the SSB on the financial performance of Islamic banks.
Practical implications
This study offers insights into the practitioner and Islamic banking regulators interested in enhancing the legitimacy of corporate governance in Islamic financial institutions.
Originality/value
This paper is among the few studies that investigate the effect of the characteristics of SSB on the financial performance of Islamic banks in particular in Islamic banks in the MENA region outside the GCC and in non-Islamic countries.
Details
Keywords
Annisa Adha Minaryanti and Muhammad Iman Sastra Mihajat
The purpose of this paper is to systematically review the study of the relationship between sharia governance (SG), which is represented by the Sharia Supervisory Board (SSB), and…
Abstract
Purpose
The purpose of this paper is to systematically review the study of the relationship between sharia governance (SG), which is represented by the Sharia Supervisory Board (SSB), and internal sharia compliance, and whether it can affect the performance of Islamic banking.
Design/methodology/approach
Literature search consists of two steps: random literature review and systematic literature review. The methodology adopted in this article is a systematic literature review.
Findings
The variable of internal sharia compliance, sharia risk and internal sharia audit on one of the indications of SG newly researched variable which will later be used as a new paradigm, to measure the implementation of Islamic sharia principles in sharia banking.
Practical implications
The development of a conceptual framework by using measurement of the new SG has practical implications for sharia bank, which can later be applied to also increase sharia banking performance by complying with Islamic sharia principles. This new concept can be used as a reference by the Financial Service Authority (Otoritas Jasa Keuangan) to establish regulations regarding SG framework, especially in Indonesia.
Originality/value
Further research can add more of it or replace it with other variables that are more relevant, in such a way that it could be empirically tested on how the independence and remuneration (lit. performance allowance) of SSB and the internal sharia control team can affect the performance of sharia banks.
Details
Keywords
Hounaida Mersni and Hakim Ben Othman
The purpose of this paper is to examine whether corporate governance mechanisms affect the reporting of loan loss provisions by managers in Islamic banks in the Middle East region.
Abstract
Purpose
The purpose of this paper is to examine whether corporate governance mechanisms affect the reporting of loan loss provisions by managers in Islamic banks in the Middle East region.
Design/methodology/approach
This empirical study uses balanced panel data from 20 Islamic banks, from seven Middle East countries for the period 2007 to 2011. The regression model is estimated using random effects specifications.
Findings
The empirical results show that discretionary loan loss provisions (DLLP) are negatively related to board size and the existence of an audit committee. Results also report a positive relationship between sharia board size and DLLP. This indicates that small sharia supervisory boards are more effective than larger ones, which could be due to the higher costs and negative effects of large groups on decision-making. Results also highlight that the existence of scholars with accounting knowledge sitting on the sharia board reduces discretionary behavior. Additional results provide evidence that an external sharia audit committee is also found to reduce discretion in Islamic banks. The conclusions are found to be robust to endogeneity issues and potentially omitted variables.
Practical implications
The findings are potentially useful for regulators and shareholders. Regulators could use the findings to focus on corporate governance mechanisms that restrain earnings management practices in Islamic banks and implement regulations to strengthen them. Additionally, this study gives shareholders further insight which enables them to better monitor the actions of managers and thus increase their control over their investments.
Originality/value
This study provides two contributions to the literature on Islamic banking. First, to the authors’ knowledge, this study is only the second piece of research focused on the impact of corporate governance on earnings management in Islamic banks. Second, the authors have examined the effect of some new corporate governance mechanisms that have not been studied previously in the research literature.
Details
Keywords
Rahma Wijayanti, Vera Diyanty and Sugiyarti Fatma Laela
This study aims to provide empirical evidence on the contingency factors that affect the implementation of education strategies and the impact of education strategy misfit on the…
Abstract
Purpose
This study aims to provide empirical evidence on the contingency factors that affect the implementation of education strategies and the impact of education strategy misfit on the performance and effectiveness of the board’s moderating role on the misfit level and performance of Islamic banks.
Design/methodology/approach
This research is a quantitative study with pooled ordinary least square panel data during the years 2007-2014 from all Indonesian Islamic commercial banks. Islamic bank performances are measured by the level of profitability and sharia financial performance. Board effectiveness is analysed by measuring the effectiveness of both the board of commissioners (BoC) and the sharia supervisory board (SSB).
Findings
This study proves that organisational competent qualities and chief executive officer tenure are the contingency factors that affect the implementation of the education strategy. This study’s results indicate that the effectiveness of both the BoC and SSB has a positive impact on the bank’s profitability and sharia financial performance. The results also show that misfit has a negative effect on sharia financial performance and that board effectiveness is proved to reduce the negative impact of a misfit on sharia financial performance. However, there is no strong evidence that board effectiveness reduces the negative impact of a misfit on profitability.
Originality/value
This study emphasises the importance of enhancing the competence and innovation of organisations in the implementation of education strategy and the need for synergy and increased capabilities among board members to achieve well-established Islamic bank performance.
Details
Keywords
Muhammad Tariq Majeed and Abida Zainab
Islamic banks provide an alternative financial system based on Sharia’h (Islamic law). However, critics argue that operation at Islamic banks is violating Sharia’h particularly in…
Abstract
Purpose
Islamic banks provide an alternative financial system based on Sharia’h (Islamic law). However, critics argue that operation at Islamic banks is violating Sharia’h particularly in terms of provision of interest free services, risk sharing and legal contract. The purpose of this paper is to empirically evaluate the Sharia’h practice at Islamic banks in Pakistan by considering some basic principles of Sharia’h.
Design/methodology/approach
Primary data are collected from 63 branches of Islamic banks in Pakistan. Questionnaire is used as an instrument. The study uses structural equation modeling that includes confirmatory factor analysis and regression analysis. Data are codified and analyzed using SPSS and Amos.
Findings
This study finds that Islamic banks are providing interest free services, ensuring that transactions and contracts offered by Islamic banks are legal and offering conflict-free environment to customers. In contrast, estimated results expose that Islamic banks are not sharing risk and Sharia’h supervisory board is not performing its role perfectly. Similarly, it is found that organization and distribution of zakat and qard-ul-hassan are weak at Islamic banks.
Research limitations/implications
Data are collected from Islamabad federal capital of Pakistan that hold just 5 per cent share of Islamic banking industry. This small share may not provide true picture of Islamic banking sector.
Practical implications
To ensure risk sharing, Islamic banking industry must consider the development of new modes of financing and innovation of more products based on Sharia’h. State Bank of Pakistan should ensure separate regulatory framework that enable Islamic banks to provide qard-ul-hassan, organize and allocate zakat.
Originality/value
This paper discusses the perception of bankers, who are actually the executors, about Shariah’s practices at Islamic banks in Pakistan. There are not many discussions on this topic that could be found, and hence this could be considered as a significant contribution by this paper to the existing literature of Islamic finance.
Details
Keywords
Sharia compliance states that the compliant company operates not only under regulations but also to the restrictions and permission of Islam. This study aims to reveal whether…
Abstract
Purpose
Sharia compliance states that the compliant company operates not only under regulations but also to the restrictions and permission of Islam. This study aims to reveal whether Sharia compliance enhances the financial reporting quality.
Design/methodology/approach
The sample is constructed from 15 Muslim majority countries, 2,300 companies for the periods between 2005 and 2017 with 23,810 firm*year observations. Financial reporting quality is measured with discretionary accruals and audit aggressiveness. Discretionary accruals is the absolute of Kothari, Leone and Wasley’s (2005) “performance matched discretionary accruals model.” Audit aggressiveness is calculated with Gul, Wu and Yang’s (2013) model.
Findings
This study reveals the behavioral differences in financial reporting quality between Sharia-compliant and non-compliant companies. According to the analyzes, Sharia compliance increases the financial reporting quality by decreasing the discretionary accruals and audit aggressiveness. This result is supported by the robustness tests.
Practical implications
Sharia compliance is not limited to business activity, financial restrictions and supervisory board for Sharia-compliant companies. It also enhances the companies’ financial reporting quality. Robustness analysis also showed that the International Financial Reporting Standards (IFRS) increases the financial reporting quality by reducing discretionary accruals and audit aggressiveness.
Originality/value
This study contributes to the accounting literature by providing an insight on the use of Islamic financial instruments. The empirical results also show that the use of IFRS and Islamic financial instruments decreases the discretionary accruals and audit aggressiveness.
Details