The Moderating Role of SSB Conflicts of Interest and Audit Committee Independence in Good Corporate Governance and Islamic Bank Performance in Indonesia

Jerry Marmen Simanjuntak, Faizi Faizi () and Airlangga Surya Kusuma
Additional contact information
Jerry Marmen Simanjuntak: Department of Management, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, Jakarta 12450, Indonesia
Faizi Faizi: Department of Islamic Economics, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, Jakarta 12450, Indonesia
Airlangga Surya Kusuma: Department of Management, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, Jakarta 12450, Indonesia

JRFM, 2025, vol. 18, issue 8, 1-17

Abstract: The Sharia Supervisory Board (SSB) and the Audit Committee (AC) are crucial components of Good Corporate Governance (GCG) in Islamic banks. This study investigates the moderating role of SSB conflicts of interest arising from cross-membership in various Islamic Financial Institutions (IFIs) and AC members’ independence in the relationship between GCG and Islamic bank performance in Indonesia. Using a sample of ten full-fledged Islamic banks from 2014 to 2023, a Moderated Regression Analysis (MRA) was employed to test three hypotheses. The key findings indicate a significant positive relationship between GCG and Islamic bank financial performance. However, no significant moderating effects of SSB conflicts of interest on the GCG–performance relationship were found. Conversely, a significant positive moderating effect of AC independence was identified. These results have important implications for practitioners, regulators, and stakeholders of the Islamic banking industry. Islamic banks should prioritize the establishment of independent audit committees to strengthen their governance framework. While SSB cross-membership may not necessarily harm performance, banks should implement appropriate oversight mechanisms to manage potential conflicts of interest. The Indonesian Financial Services Authority (OJK) and similar regulatory bodies should continue to emphasize the importance of audit committee independence in their governance guidelines.

Keywords: audit committee; conflict of interest; independence; Islamic bank performance; Sharia Supervisory Board (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/18/8/466/pdf (application/pdf)
https://www.mdpi.com/1911-8074/18/8/466/ (text/html)

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:gam:jjrfmx:v:18:y:2025:i:8:p:466-:d:1729202

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().