Audit committee attributes and Islamic bank risk-taking behavior

Umar Habibu Umar, Muhamad Abduh and Mohd Hairul Azrin Besar

Journal of Islamic Accounting and Business Research, 2023, vol. 14, issue 6, 868-886

Abstract: Purpose - This study aims to investigate the relationship between audit committee (AC) attributes and the risk-taking behavior of Islamic banks. Design/methodology/approach - The study used data generated from the annual reports of 43 full-fledged Islamic banks operating in 15 countries between 2010 and 2020. Findings - The findings indicate that AC size, AC independence and the proportion of AC members from foreign countries have a significant negative relationship with the risk-taking of Islamic banks. However, AC meetings, AC gender diversity and the proportion of AC members with doctorate degrees have insignificantly influenced the risk-taking of Islamic banks. Research limitations/implications - The study used only six AC attributes out of corporate governance mechanisms likely to affect the insolvency risk of full-fledged Islamic banks between 2010 and 2020. Practical implications - The study sheds light on the effects of AC attributes on the risk-taking of Islamic banks. The findings could allow policymakers and regulators to provide policies and regulations that could improve AC’s oversight role in constraining Islamic banks from excessive risk-taking. Besides, this study can guide the board of directors in appointing AC members who can prevent Islamic banks from taking excessive risks. Originality/value - This study provides clear and adequate empirical evidence showing how key audit committee attributes influence the risk-taking behavior of full-fledged Islamic banks.

Keywords: Audit committee; Audit committee attributes; Risk taking; Islamic banks; Generalized method of moments (GMM); Heteroscedastic panels corrected standard errors (HPCSE) regression (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-09-2022-0244

DOI: 10.1108/JIABR-09-2022-0244

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