Shari'ah governance quality and environmental, social and governance performance in Islamic banks. A cross-country evidence

Yossra Boudawara, Kaouther Toumi, Amira Wannes and Khaled Hussainey ()

Journal of Applied Accounting Research, 2023, vol. 24, issue 5, 1004-1026

Abstract: Purpose - The paper aims to examine the impact of Shari'ah governance quality on environmental, social and governance (ESG) performance in Islamic banks. Design/methodology/approach - The study's sample consists of 66 Islamic banks from 14 countries over 2015–2019. The research uses the Heckman model, which is a two-stage estimation method to obtain unbiased estimates, as ESG scores are only observable for 17 Islamic banks in Eikon Refinitiv database at the time of the analysis. Findings - The analysis shows that Shari'ah governance has a beneficial role to achieve ESG performance. The analysis also shows that enhanced profiles of Shari'ah supervisory boards' (SSB) attributes are more efficient than the operational procedures to promote ESG performance. In addition, the analysis shows that enhanced SSBs' attributes strengthen the bank's corporate governance framework, while sound-designed procedures increase the bank's social activities by emphasizing their roles to ensure Shari'ah compliance. Finally, the analysis sheds light on the failure of Shari'ah governance to promote environmental performance. Research limitations/implications - The existing databases providing companies' ESG-related information still do not offer sufficient data to conduct an international study with a larger sample of Islamic banks (IBs) having ESG scores for a more extended period. Practical implications - The research provides policy insights to Islamic banks' stakeholders to promote social and governance performance in the Islamic finance industry through improving Shari'ah governance practices. However, raising environmental awareness is imminent among all actors implicated in the Shari'ah governance processes to help overcome the anthropogenic risks. Originality/value - The research complements the governance-banks' ESG performance literature by examining the role of Shari'ah governance. The research also extends the literature on Islamic banks' sustainability by pointing to the Shari'ah governance failure to enhance environmental performance and thus achieve Maqasid al-Shariah regarding the environment.

Keywords: Environmental performance; Social performance; Governance performance; Corporate governance; Shari'ah governance; Maqasid al-Shari'ah; G21; G34; Q56 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
Working Paper: Shari’ah Governance Quality and Environmental, Social and Governance Performance in Islamic Banks. A Cross-Country Evidence (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jaarpp:jaar-08-2022-0208

DOI: 10.1108/JAAR-08-2022-0208

Access Statistics for this article

Journal of Applied Accounting Research is currently edited by Associate Professor Orthodoxia Kyriacou

More articles in Journal of Applied Accounting Research from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().