SHARI’A SUPERVISORY BOARD AND ISLAMIC BANKS’ INSOLVENCY RISK

Umar Habibu Umar (), Muhamad Abduh () and Mohd Hairul Azrin Besar ()
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Umar Habibu Umar: Universiti Brunei Darussalam, Brunei Darussalam
Muhamad Abduh: Universiti Brunei Darussalam, Brunei Darussalam
Mohd Hairul Azrin Besar: Universiti Brunei Darussalam, Brunei Darussalam

Journal of Islamic Monetary Economics and Finance, 2023, vol. 9, issue 3, 419 - 442

Abstract: This study examines how the characteristics and quality of Shari’a supervisory board (SSB) influence the insolvency risk of Islamic banks. It employs unbalanced panel data of 43 Islamic banks in 15 countries between 2010 and 2020, which are hand-collected from the banks’ annual reports. The results indicate that the SSB quality index, SSB Islamic finance professional expertise and SSB competency increase insolvency risk while the SSB members with PhDs reduce it. Meanwhile, SSB size, SSB meetings, SSB gender diversity (SSBG) and SSB members from foreign countries have no significant influence on the insolvency risk. These findings have implications for policymakers and regulators in carving policies and regulations in restraining the SSB from taking excessive risk. They can also guide the Islamic banks’ board of directors and shareholders in appointing the SSB members.

Keywords: Risk-taking; Shari’a supervisory board (SSB); SSB quality index; SSB characteristics; Islamic banks (search for similar items in EconPapers)
JEL-codes: G21 G32 G33 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:9:y:2023:i:3c:p:419-442

DOI: 10.21098/jimf.v9i3.1635

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