A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks

Nader Shahzad Virk, Tasawar Nawaz and Philip Molyneux

Journal of International Financial Markets, Institutions and Money, 2022, vol. 78, issue C

Abstract: We examine the impact of religious agency on the performance of GCC Islamic banks. Our results show that a high proportion of prominent religious scholars on Shariah supervisory boards (SSB) improves financial performance. However, when a prominent Shariah scholar chairs the SSB there are negative performance effects. With the high concentration of a few Shariah scholars, our findings have twofold implications: first, future research should develop approaches to test Shariah governance effectiveness in relation to the assigned mandate of SSBs; second, there is a need for revisiting Shariah compliance mechanisms to mitigate the embeddedness of Shariah scholars and their influence on Islamic bank performance.

Keywords: Islamic banking; Shariah governance; Entrenchment; Conflict of interest (search for similar items in EconPapers)
JEL-codes: G21 G3 G34 L25 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:78:y:2022:i:c:s1042443122000476

DOI: 10.1016/j.intfin.2022.101559

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