Search results

The purpose of this study is to examine the level of Shariah governance disclosure among Islamic banks in Malaysia and the Gulf Cooperation Council (GCC) countries (i.e. Kuwait, Bahrain, United Arab Emirates, Qatar, Oman and Saudi Arabia). On top of that, the effect of Shariah governance disclosure on Islamic banks financial performance is investigated.

Data underwent quantitative content analysis and a mean comparison of the Shariah governance disclosure mechanisms as well as multiple regression analysis. Shariah governance information is obtained from the Islamic banks' official websites and the Bursa Malaysia Exchange.

The results of the content analysis revealed that the level of Shariah governance disclosure among Malaysian Islamic banks has been more pronounced than in the GCC countries. Additionally, the multiple regression analysis results specified that of the five Shariah governance disclosure mechanisms, the Shariah committee emerged as the strongest determinant in the financial performance of the Islamic banks, followed by transparency and disclosure.

Islamic banks should emphasise publishing Shariah governance information in annual reports to reflect superior accounting practices as assessed by certified Shariah auditors with an effective monitoring system.

The empirical findings are vital for serving as a guideline for Islamic banks in Malaysia and the GCC countries to disclose their practice of Shariah governance and gain empirical insights into its effect on firms’ financial performance. Following that, Islamic banks would improve their accounting practices while adhering to Shariah principles, strengthen internal controls and boost their brand reputation.

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.

The purpose of this paper is to investigate the empirical linkage between the composition of Shariah Committee and the extent of Shariah governance disclosure in 16 licensed Islamic banks in Malaysia.

This paper adopted a multiple regression analysis to test the association between the composition of Shariah Committee and the extent of Shariah governance disclosure. A disclosure index was developed to measure the extent of Shariah governance disclosure made by the Islamic banks. Whereas to measure the extent of Shariah governance disclosure, this study used content analysis as a method of coding qualitative information in the annual reports.

Using 2009 data, the study found a significant association between different compositions of the Shariah Committee in the Malaysian Islamic banks and their Shariah governance disclosure level before the introduction of the Shariah Governance Framework (SGF). However, because of less variation in the composition of Shariah Committee after the introduction of SGF 2010, a weak linkage was found between the composition of Shariah Committee and the extent of Shariah disclosure of Malaysian Islamic banks in 2013.

Findings of this study offer several implications for further improvements of the Malaysian Islamic banking sector in particular, and other Islamic banks globally. As better composition of Shariah Committee in terms of its size, academic background and other relevant expertise would result in effective monitoring system leading to better practices of Shariah disclosure, this finding highlights the relevance and important role of the Shariah Committee in improving voluntary Shariah disclosure level of the Islamic banks. This finding suggests that ample focus has to be channelled in strengthening the composition of Shariah Committee in crafting future development of SGF in Malaysia. It is also suggested that Islamic banks need to give priority in providing more education and training in various areas of expertise to their Shariah Committee members that would result in greater confidence of investors, stakeholders and the society on the information disclosed by the banks.

The novelty of this paper lies in highlighting the importance of different composition of Shariah Committee in determining the extent of voluntary disclosure made on Shariah matters by the Islamic banks.

This study aims at investigating the impact of the disclosure and the Shariah governance on the financial performance in MENASA (Middle East, North Africa and Southeast Asia) Islamic banks.

We use the Generalized Least Squares (GLS) regression models to check the interdependence relationship between the disclosure, the Shariah governance and the financial performance of 47 Islamic banks (IBs) from ten countries operating in MENASA region. The sample period is from 2012 to 2019. In these regressions models, Return on Assets (ROA) and Return on Equity (ROE) are the dependent variables. The disclosure and the Shariah governance indicators are the independent factors. To measure the Shariah governance, we use the three sub-indices, which are the Board of Directors (BOD), the Audit Committee (AC) and the Shariah Supervisory Board (SSB). Size, Leverage and Age of the bank are used as control variables. We also used The Generalized Method of Moments (GMM) and the three-stage least squares (3SLS) estimations for robustness check.

Result shows a negative relationship between the disclosure and the two performance measures in IBs. Furthermore, as far as the governance indicators are concerned, we found that the BOD and AC, as well as the BOD and SSB, have a positive and significant impact on the ROA and ROE, respectively. This reveals that good governance had a significant association with higher performance in MENASA IBs.

The paper considers both IBs that adopt mandatory as well as voluntary AAOIFI standards and the GLS method to investigate the impact of the AAOIFI disclosure and the Shariah governance on ROA and ROE. Also, it uses the GMM and the 3SLS estimations for robustness check. It is relevant for researchers, policymakers and stakeholders concerned with IBs' performance.

This study aims to investigate the relationship between Islamic governance and the social performance of Islamic banks, pioneering a new aspect in terms of the impact of the National Shariah Board (NSB) on the social performance of Islamic banks. The essential body in the Islamic banks in charge of Islamic governance is the Shariah Supervisory Board (SSB). Therefore, in this study, the authors explore how the characteristics of the Shariah board and Islamic governance mechanisms influence the social performance of Islamic banks.

Panel data methods are applied to the annual data of 43 banks from 14 countries over the period 2012–2018 to explore the impact of Islamic governance on Islamic banks’ social performance. The authors have used all available bank annual reports in the given period. Social performance is measured by Maqasid al-Shariah (in terms of the goals of the Islamic moral economy) index using a comprehensive evaluation framework. Islamic governance is represented by the improved Islamic Governance Score (IG-Score) index, which measures the quality of Islamic governance in Islamic banks. In the research, the authors also introduce the frequency of SSB meetings in IG-Score.

The findings suggest a strong link between Islamic governance and the social performance of Islamic banks, illustrating the importance of the Shariah board in achieving maqasid. On the other hand, the research discovered that NSBs are inefficient and the existence of NSB can jeopardize the social performance of Islamic banks. The results of this research imply valuable recommendations for Islamic banks that are keen to improve their social performance.

Besides investigating the impact of SSB governance on the social performance of Islamic banks by using an improved IG score index, to the best of the authors’ knowledge, this is the first study that investigates the impact of NSBs on the social performance of Islamic banks.

This study aims to investigate the moderating effects of the Shariah committee (SC) on the extent of intellectual capital disclosure (ICD) of Islamic banks.

This study provides evidence from an analysis of a sample of Islamic banks in multiple countries over a seven-year period (2012–2018). The extent of intellectual capital information was measured and regressed against several corporate governance attributes covering board and audit committee characteristics, gender diversity of SC members and moderating variables of the SC, while controlling for firm-specific variables. A checklist was developed to measure the extent of the ICD of Islamic banks on a rubric scale ranging from 0 to 3.

The results show that the size and gender diversity among SC significantly influence the ICD practices of Islamic banks. Apart from contributing to the literature, this study may serve as valuable input for Islamic banking practitioners including regulators and standard setters to empower women and use all their potential for better intellectual capital output.

The paper highlights two main implications. Firstly, the regulator should look at the size and composition of the SC to enable a conducive environment for sound deliberation of Shariah matters. Secondly, the gender diversity among SC should be considered because women and man may have different approaches, and the best optimal combination of resources could enhance Islamic banks’ competitive advantage.

This study highlights the importance of gender diversity and size of SC in influencing the disclosure practices related to Shariah matters by the Islamic banks.

An Islamic social finance ecosystem has its specific instruments in terms of funding and investment that are in line with Shariah (Islamic law) principles. These include waqf (Islamic endowment), zakat (compulsory alms), ṣadaqah (donation), qarḍ ḥasan (benevolent loan) and others. In this context, the Islamic financial institutions can be considered as Islamic social finance institutions since it has the elements of Islamic social finance concepts. The uniqueness of these two types of institutions is that they operate with the absence of riba, maysir, gharar and thus the requirement of Shariah governance comes into existence. The practice of Shariah governance in Islamic financial institutions needs to be extensively examined by using a comprehensive measurement. Therefore, this chapter attempts to discuss on the needs of Shariah Governance Practices Index (SGPi) as a comprehensive measurement to measure the Shariah governance practices. In conclusion, it is proposed to have a comprehensive index to measure the Shariah governance practices which consider few components of Shariah governance such as the board of directors, the management, Shariah Committee and Shariah compliance functions.

This study aims to examine how digitalization affects the work efficiency of the Shariah Supervisory Board (SSB) in Islamic banks.

This study uses panel data analysis of annual report disclosures over the past 10 years. The authors have selected 79 Islamic banks for the period ranging from 2012 to 2021. The criteria for SSB efficiency used in this research are disclosure of Zakat and disclosure in the SSB report.

The econometric results show that digitalization has a positive effect on improving the work efficiency of the SSB in Islamic banks. Accordingly, the authors provide evidence that the higher the bank's digital engagement, the higher the quality of the SSB.

The findings highlight the need to improve the current understanding of SSB structures and governance mechanisms that can better assist Islamic banks in engaging in effective compliance with recent governance and accounting reforms. Moreover, Islamic banks are the most capable and appropriate to implement and activate digitalization because they are based on a vital root calling for development if there are executives believing in it, as well as legislation supporting and serving them.

The purpose of this study is to investigate the effect of financial performance (FP) and governance on the accounting and auditing organization for Islamic financial institutions (AAOIFI) disclosure for the Islamic banks.

The authors used the generalized least squares (GLS) estimation for 47 MENASA (Middle East, North Africa and Southeast Asia) Islamic banks (IBs) between 2012 and 2019. In this regression, disclosure is the endogenous variable. The performance and governance measures are the explanatory parameters. The authors use bank's size, leverage and age for control parameters. The robustness of results is verified via generalized method of moments (GMM) estimation method.

The findings indicate that performance measurement has weak effects on AAOIFI disclosure. Only the net interest margin (NIM) measure has a significant positive impact. The return of assets (ROA) and the return on equity (ROE) have a significant negative impact. Furthermore, all Shariah Governance measures have significant effects. Finally, the findings of this study support the governance's positive contribution to the disclosure in IBs.

Through including the whole issues allied to AAOIFI and their impacts on the banks' value, this study provides a significant summary for IBs, policymakers, regulators, AAOIFI and connected authorities across countries. In addition, the findings linked powers between jurisdictions with recommendations on growing the present AAOIFI practices.

This paper offers an original contribution to the accounting professionals and stakeholders who investigate the relationship between disclosure, performance and governance. It is considered as a basis for future studies in the simultaneous relation between these variables. It is crucial for accounting professionals, researchers and stakeholders interesting in the financial disclosure (FD) in IBs.

The purpose of this paper is to examine the effect of specific Islamic banks’ (IBs) corporate governance (CG) mechanisms on compliance with the Accounting and Auditing Organization for Islamic Financial Institutions’ (AAOIFI) governance standards (GSs) disclosure requirements.

Using an unweighted governance compliance index, the authors measure the extent of IBs’ compliance with 7 AAOIFI GSs’ disclosure requirements over the period 2009–2015 (372 bank-year observations). In addition, a multivariate regression analysis was used to test the four hypotheses.

This study’s results report substantial non-compliance (the mean of compliance level with AAOIFI’s GSs over the covered years for the entire sampled IBs is 52.1%). The findings reveal that the Shariah Supervisory Board’s (SSB) remuneration, SSB’s members with only industry expertise, SSB’s members with the combined industry expertise and accounting and financial expertise, the existence of internal Shariah Auditing Department and the level of investment accounts holders’ funds are positively associated with the level of compliance with AAOIFI’s GSs.

The existing studies focusing on the determinants of compliance with AAOIFI’s standards are in the early research stage, as to the best of the authors’ knowledge, there is a paucity of empirical research testing this issue. The authors extend these studies by examining all the AAOIFI’s GSs and focusing on the specific IBs’ CG mechanisms. Furthermore, a major contribution of this study is the examination of the relationship between some SSB’s characteristics and compliance level. To the best of the authors’ knowledge, this is the first research that has examined the effect of the SSB’s remuneration and expertise on compliance level.