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Corporate Governance and Performance in Islamic and Conventional Financial Institutions: Moderating Role of Institutional Quality

Author

Listed:
  • Akmal, Muhammad

    (MCB Islamic Bank Ltd, Pakistan)

  • Rashid, Abdul

    (International Institute of Islamic Economics, International Islamic University, Islamabad, Pakistan)

  • Shah, Syed Muhammad Abdul Rehman

    (Department of Humanities & Social Sciences, University of Engineering and Technology, Taxila, Pakistan)

  • Rehman, Jamshid ur

    (Department of Management Sciences, Khushal Khan Khattak University, Karak, Pakistan)

Abstract

This study explores the impact of corporate governance (CG) indicators on the financial performance of Islamic and conventional financial institutions. It also scrutinizes the impact of institutional quality (IQ) as a moderator in the nexus between corporate governance and performance. The study also examines a panel dataset of Pakistani financial institutions for the period 2006-2017. The estimation of a two-step system GMM signifies that CG significantly contributes towards improving the overall performance of financial institutions (FIs). However, the results display differential effects of CG on the performance of Islamic financial institutions (IFIs) and conventional financial institutions (CFIs). Moreover, institutional quality (IQ) significantly moderates and shapes the impact of CG on the performance of both types of FIs. Hence, institutional quality is an important element in strengthening the contributions of CG in increasing the performance of FIs. The study provides important suggestions to policymakers to improve the quality of institutions by implementing the rule of law and controlling corruption. This may enhance the effectiveness of CG and consequently institutional performance.

Suggested Citation

  • Akmal, Muhammad & Rashid, Abdul & Shah, Syed Muhammad Abdul Rehman & Rehman, Jamshid ur, 2024. "Corporate Governance and Performance in Islamic and Conventional Financial Institutions: Moderating Role of Institutional Quality," Audit and Accounting Review, University of Management and Technology, Lahore, Pakistan, vol. 4(1), pages 54-80.
    • Handle: RePEc:ris:aarumt:3606
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    More about this item

    Keywords

    conventional financial institutions (CFIs); corporate governance (CG); institutional quality (IQ); Islamic financial institutions (IFIs); performance;
    All these keywords.

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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