Does corporate governance affect the performance and stability of Islamic banks?

Emmanuel Mamatzakis, Christos Alexakis, Khamis Al Yahyaee, Vasileios Pappas, Asma Mobarek and Sabur Mollah
Additional contact information
Christos Alexakis: ESC Rennes School of Business - ESC [Rennes] - ESC Rennes School of Business
Khamis Al Yahyaee: Muscat University
Vasileios Pappas: University of Kent [Canterbury]
Asma Mobarek: Cardiff Business School - Cardiff University
Sabur Mollah: University of Sheffield [Sheffield]

Post-Print from HAL

Abstract: Purpose This paper aims to investigate the impact of corporate governance practices on cost efficiency and financial stability for a sample of Islamic and conventional banks. In the analysis, the author uses a set of corporate governance variables that include, the board size, board independence, director gender, board meetings, board attendance, board committees, chair independence and CEO characteristics. Design/methodology/approach The author uses corporate governance data of Islamic banks that is unique in this field. In the analysis, the author also uses stochastic frontier analysis and panel vector autoregression models to quantify long-run and short-run statistical relationships between the operational efficiency of Islamic Banks and corporate governance practices. Findings According to the results, Islamic and conventional banks exhibit important differences in the effects of corporate governance practices on cost efficiency and financial stability. Results show that with a blind general adoption of corporate governance practices, Islamic banks may suffer a loss in their value since the adoption of the third layer of binding practices, over and above the already existing ones, imposed by the Sharia Board and the Board of Directors, may lead to cumbersome business operations. This conclusion is of importance to Islamic Banks since they struggle to survive in a very competitive international environment. Practical implications The author believes that the results may be of a certain value to regulators, policymakers and managers of Islamic banks. Based on the results, the author postulate that Islamic banks should select carefully international corporate governance practices. Social implications Islamic banks should not adopt additional third layer of binding practices as that would result lower performance and instability that would be damaging for the economy Originality/value This study employs a unique sample of Islamic banks that includes corporate governance data hand collected. Our findings of the corporate governance impact on Islamic banks performance and stability are therefore unique in the literature.

Date: 2023-02-28
References: Add references at CitEc
Citations:

Published in Corporate Governance: The international journal of business in society, 2023, 23 (4), pp.888-919. ⟨10.1108/CG-05-2022-0217⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:hal:journl:hal-04101298

DOI: 10.1108/CG-05-2022-0217

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().