The impact of AAOIFI governance disclosure on Islamic banks performance

Tawida Elgattani and Khaled Hussainey ()

Journal of Financial Reporting and Accounting, 2020, vol. 19, issue 3, 434-454

Abstract: Purpose - This study aims to investigate the impact of the accounting and auditing organisation for Islamic financial institution (AAOIFI) governance disclosure on the performance of Islamic banks (IBs). Design/methodology/approach - The ordinary least squares regression model was used to test the impact of AAOIFI governance disclosure on the performance of 126 IBs from 8 countries that mandatorily adopt the AAOIFI standards for three years (2013–2015). In this regression model, return on asset (ROA) and return on equity (ROE) are the dependent variables, while AAOIFI governance disclosure is the independent variable. Corporate governance mechanisms, firm characteristics, year dummy and country dummy are used as control variables. Findings - This paper found an insignificant relationship between AAOIFI governance disclosure and IBs performance. Research limitations/implications - This study highlighted the implication that the current research may help IBs and encourage them to disclose more information in annual reports, especially those related to AAOIFI governance standards because following good corporate governance leads to good financial performance. The major limitation of the paper is that it is only focussed on two measurements of bank performance – ROA and ROE; it would be good to use other firm performance measures, such as profit margin. Originality/value - This study provides new empirical evidence on the impact of AAOIFI governance disclosure on IBs performance.

Keywords: Islamic banks; AAOIFI governance; Islamic banks performance; Return on asset and return on equity (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrapp:jfra-03-2020-0053

DOI: 10.1108/JFRA-03-2020-0053

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Journal of Financial Reporting and Accounting is currently edited by Prof. Aziz Jaafar and Prof Khaled Hussainey

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