IDEAS home Printed from https://ideas.repec.org/a/eee/glofin/v51y2022ics104402831930359x.html
   My bibliography  Save this article

Shariah governance in Islamic banks: Practices, practitioners and praxis

Author

Listed:
  • Fatmawati, Dewi
  • Ariffin, Noraini Mohd.
  • Abidin, Nor Hafizah Zainal
  • Osman, Ahmad Zamri

Abstract

This study examines Shariah governance in Islamic banks by analyzing and comparing international and national Shariah governance codes across 11 countries and the annual reports of the largest stand-alone Islamic bank in each of these countries. Drawing upon the practice theory framework, this study identifies the similarities and differences across countries in Shariah governance practices, practitioners, and praxis. Regarding practices, we found that the 11 countries reviewed have adopted different approaches, i.e., strict, moderate, or flexible approaches, in developing regulations for Shariah governance structures and processes. The approach taken by each country, in turn, influences Shariah governance practitioners and praxis at the institutional level to some extent. Specifically, Islamic banks in countries belonging to the moderate and flexible groups are likely to be more varied in terms of Shariah governance practitioners as well as praxis (activities or processes) to ensure Shariah compliance as compared to their counterparts in countries with strict regulations. Analyzing current Shariah governance practices in these 11 countries can promote a greater understanding and resolution in addressing critical issues due to different contextual circumstances. Therefore, the findings of this study can provide relevant information for both regulators and practitioners to further improve the Shariah governance best practices in the Islamic banking industry.

Suggested Citation

  • Fatmawati, Dewi & Ariffin, Noraini Mohd. & Abidin, Nor Hafizah Zainal & Osman, Ahmad Zamri, 2022. "Shariah governance in Islamic banks: Practices, practitioners and praxis," Global Finance Journal, Elsevier, vol. 51(C).
  • Handle: RePEc:eee:glofin:v:51:y:2022:i:c:s104402831930359x
    DOI: 10.1016/j.gfj.2020.100555
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S104402831930359X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.gfj.2020.100555?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Nurfarahin M. Haridan & Ahmad F. S. Hassan & Yusuf Karbhari, 2018. "Governance, religious assurance and Islamic banks: Do Shariah boards effectively serve?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(4), pages 1015-1043, December.
    2. Safiullah, Md & Shamsuddin, Abul, 2018. "Risk in Islamic banking and corporate governance," Pacific-Basin Finance Journal, Elsevier, vol. 47(C), pages 129-149.
    3. Gerry Johnson & Leif Melin & Richard Whittington, 2003. "Micro Strategy and Strategizing: Towards an Activity‐Based View," Journal of Management Studies, Wiley Blackwell, vol. 40(1), pages 3-22, January.
    4. Sabur Mollah & M. Kabir Hassan & Omar Farooque & Asma Mobarek, 2017. "The governance, risk-taking, and performance of Islamic banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 51(2), pages 195-219, April.
    5. Mollah, Sabur & Zaman, Mahbub, 2015. "Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 418-435.
    6. Rihab Grassa, 2015. "Shariah supervisory systems in Islamic finance institutions across the OIC member countries," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 23(2), pages 135-160, May.
    7. Niamh M. Brennan & Collette E. Kirwan, 2015. "Audit committees: practices, practitioners and praxis of governance," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 28(4), pages 466-493, May.
    8. Abdullah Mohammed Ayedh & Abdelghani Echchabi, 2015. "Shari’ah supervision in the Yemeni Islamic banks: a qualitative survey," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 7(2), pages 159-172, May.
    9. Rihab Grassa & Hamadi Matoussi, 2014. "Is corporate governance different for Islamic banks? A comparative analysis between the Gulf Cooperation Council and Southeast Asian countries," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 9(1), pages 27-51.
    10. Rihab Grassa, 2016. "Corporate governance and credit rating in Islamic banks: Does Shariah governance matters?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(4), pages 875-906, December.
    11. Ali, Mohsin & Azmi, Wajahat, 2016. "Religion in the boardroom and its impact on Islamic banks' performance," Review of Financial Economics, Elsevier, vol. 31(C), pages 83-88.
    12. Ahmad Alkhamees, 2013. "The impact of Shari’ah governance practices on Shari’ah compliance in contemporary Islamic finance," Journal of Banking Regulation, Palgrave Macmillan, vol. 14(2), pages 134-163, April.
    13. Hadri Kusuma & Ariza Ayumardani, 2016. "The Corporate Governance Efficiency And Islamic Bank Performance : An Indonesian Evidence," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 13(1), pages 111-120, June.
    14. Thomas Ahrens & Igor Filatotchev & Steen Thomsen, 2011. "The research frontier in corporate governance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(3), pages 311-325, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nomran, Naji Mansour & Haron, Razali, 2020. "A systematic literature review on Sharı’ah governance mechanism and firm performance in Islamic banking," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 27, pages 91-123.
    2. Kok, Seng Kiong & Giorgioni, Gianluigi & Farquhar, Stuart, 2022. "The trade-off between knowledge accumulation and independence: The case of the Shariah supervisory board within the Shariah governance and firm performance nexus," Research in International Business and Finance, Elsevier, vol. 59(C).
    3. Al-Shboul, Mohammad & Maghyereh, Aktham & Hassan, Abul & Molyneux, Phillip, 2020. "Political risk and bank stability in the Middle East and North Africa region," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    4. Hassan, M. Kabir & Aliyu, Sirajo, 2018. "A contemporary survey of islamic banking literature," Journal of Financial Stability, Elsevier, vol. 34(C), pages 12-43.
    5. Safiullah, Md & Hassan, M. Kabir & Kabir, Md Nurul, 2022. "Corporate governance and liquidity creation nexus in Islamic banks—Is managerial ability a channel?," Global Finance Journal, Elsevier, vol. 51(C).
    6. Kok, Seng Kiong & Filomeni, Stefano, 2021. "The holding behavior of Shariah financial assets within the global Islamic financial sector: A macroeconomic and firm-based model," Global Finance Journal, Elsevier, vol. 50(C).
    7. Rita Wijayanti & Doddy Setiawan, 2022. "Social Reporting by Islamic Banks: The Role of Sharia Supervisory Board and the Effect on Firm Performance," Sustainability, MDPI, vol. 14(17), pages 1-25, September.
    8. Safiullah, Md & Shamsuddin, Abul, 2019. "Risk-adjusted efficiency and corporate governance: Evidence from Islamic and conventional banks," Journal of Corporate Finance, Elsevier, vol. 55(C), pages 105-140.
    9. Mushtaq Hussain Khan & Mohammad Bitar & Amine Tarazi & Arshad Hassan & Ahmad Fraz, 2021. "Corruption and bank risk-taking: The deterring role of Shari'ah supervision," Working Papers hal-03366460, HAL.
    10. Safiullah, Md, 2021. "Stability efficiency in Islamic banks: Does board governance matter?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    11. Marwa Elnahass & Mohamed Marie & Mohammed Elgammal, 2022. "Terrorist attacks and bank financial stability: evidence from MENA economies," Review of Quantitative Finance and Accounting, Springer, vol. 59(1), pages 383-427, July.
    12. Kok, Seng Kiong & Shahgholian, Azar, 2023. "The impact of proximity within elite corporate networks on the Shariah governance-firm performance nexus: Evidence from the global Shariah elite," Emerging Markets Review, Elsevier, vol. 54(C).
    13. Abid, Ammar & Gull, Ammar Ali & Hussain, Nazim & Nguyen, Duc Khuong, 2021. "Risk governance and bank risk-taking behavior: Evidence from Asian banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    14. Shahzad Virk, Nader & Nawaz, Tasawar & Molyneux, Philip, 2022. "A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    15. Bilgin, Mehmet Huseyin & Danisman, Gamze Ozturk & Demir, Ender & Tarazi, Amine, 2021. "Economic uncertainty and bank stability: Conventional vs. Islamic banking," Journal of Financial Stability, Elsevier, vol. 56(C).
    16. Bitar, Mohammad & Tarazi, Amine, 2019. "Creditor rights and bank capital decisions: Conventional vs. Islamic banking," Journal of Corporate Finance, Elsevier, vol. 55(C), pages 69-104.
    17. Elnahass, Marwa & Trinh, Vu Quang & Li, Teng, 2021. "Global banking stability in the shadow of Covid-19 outbreak," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    18. Trinh, Vu Quang & Kara, Alper & Elnahass, Marwa, 2022. "Dividend payout strategies and bank survival likelihood: A cross-country analysis," International Review of Financial Analysis, Elsevier, vol. 81(C).
    19. Duqi, Andi & Jaafar, Aziz & Warsame, Mohammed H., 2020. "Payout policy and ownership structure: The case of Islamic and conventional banks," The British Accounting Review, Elsevier, vol. 52(1).
    20. Mohammad Bitar & Sami Ben Naceur & Rym Ayadi & Thomas Walker, 2021. "Basel Compliance and Financial Stability: Evidence from Islamic Banks," Journal of Financial Services Research, Springer;Western Finance Association, vol. 60(1), pages 81-134, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:glofin:v:51:y:2022:i:c:s104402831930359x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620162 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.