DOES CORPORATE GOVERNANCE MATTER FOR ASSET QUALITY OF ISLAMIC BANKS?
Abstract
This study investigates the impact of corporate governance on asset quality of Islamic banks by employing data on 129 Islamic banks from 29 countries spanning the period from 2008 to 2017. The study shows that asset quality of Islamic banks is positively and significantly sensitive to an increase in board independence, Shariah board, and audit committee effectiveness. The study finds that female participation in management as CEOs seems to detract from good performance and that more board meetings can be harnessed to improve banks’ asset quality. These empirical findings have practical policy implications regarding asset quality management and board construction within the Islamic banking sector.
Downloads
References
Abdulazeez, D. A., Lawal, T., & Ibrahim, M. Y. (2019). Board Structure and Asset Quality of Listed Deposit Money Banks In Nigeria. Jurnal Riset Akuntansi dan Keuangan, 7, 1–18.
Ahamed, M. M. (2017). Asset Quality, Non-interest Income, and Bank Profitability: Evidence from Indian Banks. Economic Modelling, 63, 1–14.
Ahmad, S., Amjad, M., & Aslam, E. (2018). Types of Interest in Islamic Law Analysis and Application. Pakistan Journal of Islamic Research, 18, 168–170.
Al-Malkawi, H. -A. N., & Pillai, R. (2018). Analyzing Financial Performance by Integrating Conventional Governance Mechanisms into the GCC Islamic Banking Framework. Managerial Finance, 44, 604–623.
Almutairi, A. R., & Quttainah, M. A. (2017). Corporate Governance: Evidence from Islamic Banks. Social Responsibility Journal, 13, 601–624.
AlSagr, N., Belkhaoui, S., & Aldosari, A. (2018). The Effect of Corporate Governance Mechanisms on Bank Performance Evidence from Saudi Banking Sector. Asian Economic and Financial Review, 8, 1111–1125.
Aslam, E., & Haron, R. (2020a). Does Corporate Governance Affect the Performance of Islamic Banks? New Insight into Islamic Countries. Corporate Governance: The International Journal of Business in Society, 20, 1073-1090.
Aslam, E., & Haron, R. (2020b). The Influence of Corporate Governance on Intellectual Capital Efficiency: Evidence from Islamic Banks of OIC Countries. Asian Journal of Accounting Research, 5, 195-208.
Aslam, E., Haron, R., & Ahmad, S. (2020). A Comparative Analysis of the Performance of Islamic and Conventional Banks: Does Corporate Governance Matter?. Int. J. Business Excellence, 20, Early Cite.
Aslam, E., Haron, R., & Tahir, M. N. (2019). How Director Remuneration Impacts Firm Performance: An Empirical Analysis of Executive Director Remuneration in Pakistan. Borsa Istanbul Review, 19, 186–196.
Aslam, E., Kalim, R., & Fizza, S. (2019). Do Cash Holding and Corporate Governance Structure Matter for the Performance of Firms? Evidence from KMI 30-and KSE 100-indexed Firms in Pakistan. Global Business Review, 20, 313–330.
Aspiranti, T., & Amaliah, I. (2019). MSME’s Acceleration Strategy based on Sharia Bank Financial Performance in Indonesia. MIMBAR: Jurnal Sosial dan Pembangunan, 35, 277–285.
Chazi, A., Khallaf, A., & Zantout, Z. (2018). Corporate Governance and Bank Performance: Islamic Versus Non-Islamic Banks in GCC Countries. The Journal of Developing Areas, 52, 109–126.
Fakhrunnas, F., & Ramly, Z. (2017). Board of Directors and Risk-taking Behavior of Islamic Banks in South East Asia. Tazkia Islamic Finance and Business Review, 10, 162–177.
Farag, H., Mallin, C., & Ow-Yong, K. (2018). Corporate Governance in Islamic banks: New Insights for Dual Board Structure and Agency Relationships. Journal of International Financial Markets, Institutions and Money, 54, 59–77.
Grassa, R., & Matoussi, H. (2014). Is Corporate Governance Different for Islamic Banks? A Comparative Analysis between the Gulf Cooperation Council and Southeast Asian Countries. International Journal of Business Governance and Ethics, 9, 27–51.
Grove, H., Patelli, L., Victoravich, L. M., & Xu, P. T. (2011). Corporate Governance and Performance in the Wake of the Financial Crisis: Evidence from US Commercial Banks. Corporate Governance: an International Review, 19, 418–436.
Gujarati, D. N. (2009). Basic econometrics. Tata McGraw-Hill Education, New York. McGRAW-Hill.
John, K., De Masi, S., & Paci, A. (2016). Corporate Governance in Banks. Corporate Governance: An International Review, 24, 303–321.
Juhro, S. M., Narayan, P. K., Iyke, B. N., & Trisnanto, B. (2020). Is There a Role for Islamic Finance and R&D in Endogenous Growth Models in the Case of Indonesia?. Pacific-Basin Finance Journal, 62, 101297. https://doi.org/10.1016/j.pacfin.2020.101297
Mahmood, M., Khan, S., Ijaz, F., & Aslam, E. (2014). Determinants of Profitability of Islamic Banking Industry : An Evidence from Pakistan. Business & Economic Review, 6, 27–46.
Mollah, S., Hassan, M. K., Al Farooque, O., & Mobarek, A. (2017). The Governance, Risk-taking, and Performance of Islamic Banks. Journal of Financial Services Research, 51, 195–219.
Naushad, M., & Malik, S. A. (2015). Corporate Governance and Bank Performance: A Study of Selected Banks in GCC Region. Asian Social Science, 11, 226–241.
Nguyen, T., Locke, S., & Reddy, K. (2015). Does Boardroom Gender Diversity Matter? Evidence from a Transitional Economy. International Review of Economics & Finance, 37, 184–202.
Nomran, N. M., & Haron, R. (2020). Relevance of Shari’ah Governance in Driving Performance of Islamic Banks during the Financial Crisis: International Evidence. In Banking and Finance. IntechOpen.
Rehman, A. U., Aslam, E., & Iqbal, A. (2021). Intellectual Capital Efficiency and Bank Performance: Evidence from Islamic Banks. Borsa Istanbul Review. Early Cite.
Shabbir, M. S., Aslam, E., Irshad, A., Bilal, K., Aziz, S., Abbasi, B. A., & Zia, S. (2020). Nexus between Corporate Social Responsibility and Financial and Nonfinancial Sectors’ Performance: A Non-linear and Disaggregated Approach. Environmental Science and Pollution Research, 27, 39164-39179.
Tarchouna, A., Jarraya, B., & Bouri, A. (2017). How to Explain Nonperforming Loans by Many Corporate Governance Variables Simultaneously? A Corporate Governance Index is Built to US Commercial Banks. Research in International Business and Finance, 42, 645–657.
Wang, W.-K., Lu, W.-M., & Lin, Y.-L. (2012). Does Corporate Governance Play an Important Role in BHC Performance? Evidence from the US. Economic Modelling, 29, 751–760.
Windmeijer, F. (2005). A Finite Sample Correction for the Variance of Linear Efficient Two-step GMM Estimators. Journal of Econometrics, 126, 25–51.
Wooldridge, J. M. (2005). Simple Solutions to the Initial Conditions Problem in Dynamic, Nonlinear Panel Data Models with Unobserved Heterogeneity. Journal of Applied Econometrics, 20, 39–54.
Copyright (c) 2021 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
