Corporate governance quality of Islamic banks: measurement and effect on financial performance

Hana Ajili and Abdelfettah Bouri

International Journal of Islamic and Middle Eastern Finance and Management, 2018, vol. 11, issue 3, 470-487

Abstract: Purpose - This paper aims to assess the measurement of the Corporate Governance (CG) quality of Islamic Banks (IBs) and its effect on financial performance. Design/methodology/approach - In the applied part of this study, a sample of 44 IBs operating in Bahrain, Kuwait, Qatar, Oman, the United Arab Emirates and the Kingdom of Saudi Arabia were investigated according to information provided by the national central bank websites of the Gulf Cooperation Council (GCC) countries. To measure the governance quality, CG-index was constructed based on three sub-indices which are the Board of Directors (BOD), the Audit Committees (AC) and theShariahSupervisory Board (SSB) indices. Findings - Findings revealed that CG quality of IBs in GCC countries adhere to 74 per cent of the attributes addressed in the CG-index. The results also showed that IBs in GCC countries valued the effectiveness of SSB much more than the conventional CG mechanisms. Using multiple regression models, findings suggested no statistically significant relation between CG quality and financial performance which would imply that good CG had an insignificant association with high performance in GCC IBs. Originality/value - The current paper may serve to assist IBs stakeholders to better understand the CG practices of IBs. In addition, the observed insignificant relation between the quality of CG practices and performance should sensitize the IBs regulators in the GCC countries to the necessity of improving the existing CG requirements.

Keywords: Financial performance; Islamic banks; Corporate governance quality (search for similar items in EconPapers)
Date: 2018
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:
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:imefmp:imefm-05-2017-0131

DOI: 10.1108/IMEFM-05-2017-0131

Access Statistics for this article

International Journal of Islamic and Middle Eastern Finance and Management is currently edited by Prof M. Kabir Hassan

More articles in International Journal of Islamic and Middle Eastern Finance and Management from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().