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A systematic literature review on Sharı’ah governance mechanism and firm performance in Islamic banking

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Abstract

Purpose – This paper aims to systematically review the existing studies on the relationship of Shari’ah governance (SG), as represented by the Shari’ah supervisory board (SSB), with firm performance of Islamic banks (IBs), to suggest opportunities for future research in this field. Design/methodology/approach – By adopting a systematic literature review, 21 empirical and theoretical papers published in Scopus concerning the relationship between SSB and performance of IBs were selected for review and analysis. Findings – In light of the existing research studies’ limitations, this paper suggests that the effect of SSB on IBs’ performance still requires more empirical analyses using alternative analytical methods, alternative measures, and different periods (during crisis and non-crisis). Besides that, these studies should take into account the differences across jurisdictions in their SG models, the degree of agencies’ intervention in SG practices, the control over cross-memberships of scholars, and the differences across IBs in the position of SSB in the organization structure. Practical implications – The analysis undertaken in this paper would address the literature gaps on the effect of SSB on IBs’ performance as this study serves as a guide for the researchers, academicians, and interested researchers from Islamic international autonomous non-for-profit organizations, e.g. AAOIFI and IFSB in research related to this important area. Importantly, the findings of this study would support regulators and related authorities across jurisdictions with suggestions on improving the current SG practices. Originality/value – This paper presents a critical review of the existing research on SSB and IB performance and suggests new variables, measurements, analytical methods, and new issues for researchers in this area. Thus, it identifies the literature gap that still needs further empirical investigation and a suitable way to close it.

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  • 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.
    • Handle: RePEc:ris:isecst:0185
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    1. Farag, Hisham & Mallin, Chris & Ow-Yong, Kean, 2018. "Corporate governance in Islamic banks: New insights for dual board structure and agency relationships," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 59-77.
    2. Winters, John V., 2009. "Wages and prices: Are workers fully compensated for cost of living differences?," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 632-643, September.
    3. 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.
    4. Majdi Anwar Quttainah & John Cocco & Awad Al-Zufairi, 2017. "The determinants of the effectiveness of corporate governance at Islamic banks," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 12(2), pages 174-196.
    5. Abdelsalam, Omneya & Dimitropoulos, Panagiotis & Elnahass, Marwa & Leventis, Stergios, 2016. "Earnings management behaviors under different monitoring mechanisms: The case of Islamic and conventional banks," Journal of Economic Behavior & Organization, Elsevier, vol. 132(S), pages 155-173.
    6. 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.
    7. Shibani, Osama & De Fuentes, Cristina, 2017. "Differences and similaritites between corporate governance principles in Islamic banks and Conventional banks," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1005-1010.
    8. 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.
    9. 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.
    10. Monal Abdel-Baki & Valerio Leone Sciabolazza, 2014. "A consensus-based corporate governance paradigm for Islamic banks," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 6(1), pages 93-108, April.
    11. Ciftci, Ilhan & Tatoglu, Ekrem & Wood, Geoffrey & Demirbag, Mehmet & Zaim, Selim, 2019. "Corporate governance and firm performance in emerging markets: Evidence from Turkey," International Business Review, Elsevier, vol. 28(1), pages 90-103.
    12. 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.
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    Cited by:

    1. Faozi A. Almaqtari & Hamood Mohd. Al-Hattami & Khalid M. E. Al-Nuzaili & Mohammed A. Al-Bukhrani, 2020. "Corporate governance in India: A systematic review and synthesis for future research," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1803579-180, January.
    2. Achraf Haddad, 2023. "Impact of financial development initiatives on the banks’ financial performance: comparative study in the stakeholders’ theory framework," SN Business & Economics, Springer, vol. 3(1), pages 1-27, January.

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    More about this item

    Keywords

    Shari’ah governance; Shari’ah supervisory board; Performance; Islamic banks; Systematic literature review;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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