scholarly journals DOES CORPORATE GOVERNANCE MATTER FOR ASSET QUALITY OF ISLAMIC BANKS?

2021 ◽  
Vol 24 (2) ◽  
pp. 221-236
Author(s):  
Ejaz Aslam ◽  
Aziz Ur-Rehman ◽  
Anam Iqbal
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Banking Sector ◽  
Policy Implications ◽  
Islamic Banking ◽  
Board Independence ◽  
Islamic Banks ◽  
Asset Quality ◽  
The Impact

This study investigates the impact of corporate governance on asset quality of Islamic banks by employing data on 129 Islamic banks from 29 countries spanning the period from 2008 to 2017. The study shows that asset quality of Islamic banks is positively and significantly sensitive to an increase in board independence, Shariah board, and audit committee effectiveness. The study finds that female participation in management as CEOs seems to detract from good performance and that more board meetings can be harnessed to improve banks’ asset quality. These empirical findings have practical policy implications regarding asset quality management and board construction within the Islamic banking sector.

scholarly journals Impact of Mergers and Acquisitions on Operational Performance of Islamic Banking Sector

2021 ◽  
Vol 9 (1) ◽  
pp. 25-36
Author(s):  
Nazim Ullah ◽  
Fauzias Mat Nor ◽  
Junaidah Abu Seman
Keyword(s):  
Market Structure ◽  
Banking Sector ◽  
Negative Impact ◽  
Policy Implications ◽  
Strategic Decision ◽  
Operational Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Operating Income ◽  
The Impact

Merger and acquisition (hereafter MA) are the business expansion strategy. Islamic bank is the niche banking sector compared to its peers while it is categorized as too small to succeed. The paper aims to analyze the impact of MA on the operational performance of the Islamic banking sector. This study employs empirical research methods, namely cross-sectional pooled regression and panel data regression to analyze a set of samples consisting of 10 Islamic banks involved in MA from 6 countries, drawn from the International Monetary Fund (IMF), World bank, Ficth Connect, and Bloomberg over the years of 2009Q1to 2018Q4. The operational performance is estimated using accounting-based measures while the Herfindahl-Hirschman Index (HHI) and the concentration ratio (CR) are applied to signify market structure. Total assets, total deposits, and operating income variables are used to represent bank size. The findings indicate that bank size shows a negative impact on operational performance. While the segregated level of bank size which is larger banks and concentrated market structure has a greater impact on the operational performance of Islamic banks in the post-MA period. The paper concludes by discussing policy implications for policymakers and academicians for having the strategic decision on the MA deal and further research.

Does corporate governance explain the quality of bank loan portfolios?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vera Fiador ◽  
Emmanuel Sarpong-Kumankoma
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Bank Loan ◽  
Estimation Model ◽  
Content Type ◽  
Loan Portfolios ◽  
Loan Quality ◽  
Asset Quality ◽  
The Impact

Purpose The purpose of this study is to assess the impact of corporate governance variables on the quality of bank loan portfolios. Design/methodology/approach The study used a panel-corrected standard errors estimation model with the most recent 11-year data from 2006 to 2016 on selected Ghanaian banks. Findings The findings indicate that corporate governance is relevant within the banking sector and plays a key role in improving loan quality. Having a large board with the attendant pool of expertize, boards with mostly non-executive members and duality of the CEO-board chair can be harnessed to improve bank loan quality. Female participation on boards seems to detract from good performance, creating the impression of tokenism in the Ghanaian banking sector. Originality/value The study has important implications for board construction within the banking sector and the discourse on bank asset quality.

scholarly journals Does Governance Affect Compliance with IFRS 7?

2021 ◽  
Vol 14 (6) ◽  
pp. 239
Author(s):  
Amal Yamani ◽  
Khaled Hussainey ◽  
Khaldoon Albitar
Keyword(s):  
Corporate Governance ◽  
Voluntary Disclosure ◽  
Audit Committee ◽  
Banking Sector ◽  
Mandatory Disclosure ◽  
Disclosure Requirements ◽  
Corporate Governance Codes ◽  
Ifrs 7 ◽  
Enforcement Mechanisms ◽  
The Impact

Although there has been considerable research on the impact of corporate governance on corporate voluntary disclosure, empirical evidence on how governance affects compliance with mandatory disclosure requirements is limited. We contribute to governance and disclosure literature by examining the impact of corporate governance on compliance with IFRS 7 for the banking sector in Gulf Cooperation Council (GCC). We use a self-constructed disclosure index to measure compliance with IFRS 7. We use regression analyses to examine the impact of board characteristics, audit committee characteristics and ownership structure on compliance with IFRS 7. Using a sample of 335 bank-year observations for GCC listed banks over the period 2011–2017, we report evidence that corporate governance variables affect compliance with IFRS 7. However, the significance of these variables depends on the type of the regression model used. Our findings suggest that governance matters for mandatory disclosure requirements. So to improve the level of compliance, regulators, official authorities, and policymakers should intensify their efforts toward improving corporate governance codes, following up their implementation and enhancing the enforcement mechanisms.

scholarly journals The Overseas Experience of Audit Committee and Audit Fees: Empirical Evidence from China

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-16
Author(s):  
Chengai Li ◽  
Lin Pan ◽  
Meilan Chen
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Learning Experience ◽  
Accounting Information ◽  
Audit Fees ◽  
Positive Influence ◽  
Positive Role ◽  
Quality Of Accounting Information ◽  
The Impact

The complexity of audit committee experience, including the overseas experience, has an important impact on corporate governance. In this paper, we study the impact of the overseas experiences of the members of audit committee on audit fees. Our empirical analysis and results show that the audit committee overseas experience can significantly increase audit fees. Further, the positive influence of the audit committee overseas experience on audit fees is more pronounced in state-owned enterprises and regions with weak marketization. In addition, we divide the overseas experience into overseas learning experience and overseas working experience. We find that both types of experience present in the audit committee significantly increase the audit fees. Finally, we find that the audit committee overseas experience can significantly improve the quality of accounting information and play a positive role in corporate governance.

scholarly journals The Impact of Corporate Governance on Profitability of Conventional Banks Operating in Pakistan

2020 ◽  
Vol 1 (4) ◽  
pp. 260-267
Author(s):  
Hafiz Muhammad Naveed ◽  
Shoaib Ali ◽  
Yao Hongxing ◽  
Saqib Altaf ◽  
Jan Muhammad Sohu
Keyword(s):  
Corporate Governance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Board Independence ◽  
Return On Assets ◽  
Board Size ◽  
Return On Equity ◽  
Board Directors ◽  
Conventional Banks ◽  
The Impact

The key purpose of present research study to examine the association among corporate governance and profitability banks in developing counties. For such primary objective, annually based data collected from 2004 to 2016. The data taken from annual financial reports which issued by conventional banks.  We have used ADF (Augmented Dickey Fuller) test to examine the unit-root of variables. Moreover, the multiple linear regression utilized for hypothetical estimation. The results indicates that corporate governance and conventional banks profitability of Pakistan are bidirectional (positive-negative) associated to each other. In addition, the board size (Board Directors) is negatively associated with Return on assets and return on equity of banks. Similarly, the board independence (Insider-Outsider Board Directors) is positively influenced to return on assets and return on equity of conventional banks of Pakistan. The overall findings shows that board size and board independence are highly associated with return on equity than return on assets. Moreover, banking sector in developing countries the board size should contain on appropriate strength and acquire more professional and qualified staff. An optimal number of directors in a board size there is a need of commercial banks as to increase the profitability. To enhance the investors’ confidence with the bank there is also a need of the commercial banks to increases the board independency.

COMPETITION-STABILITY RELATIONSHIP IN DUAL BANKING SYSTEMS: EVIDENCE FROM EFFICIENCY-ADJUSTED MARKET POWER

2021 ◽  
pp. 1-24
Author(s):  
MUDEER AHMED KHATTAK ◽  
OMAR ALAEDDIN ◽  
MOUTAZ ABOJEIB
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Banking Sector ◽  
Market Competition ◽  
Policy Implications ◽  
Islamic Banks ◽  
Banking Competition ◽  
Precise Measure ◽  
Conventional Banks ◽  
The Impact

This research attempts to explore the impact of banking competition on financial stability employing a more precise measure of market power. It was found that Islamic banks are less stable and are enjoying lower market power. The analysis shows that higher market competition makes the banking sector vulnerable to defaults, supporting the “competition-fragility view”. This research finds no difference in the relationship for Islamic banks indicates that Islamic banks might be involved in traditional banking activities as conventional banks. The results are consistent and robust to different estimation approaches and subsamples. This research carries regulatory and policy implications.

The impact of corporate governance mechanisms on earnings management in Islamic banks in the Middle East region

2016 ◽  
Vol 7 (4) ◽  
pp. 318-348 ◽  
Author(s):  
Hounaida Mersni ◽  
Hakim Ben Othman
Keyword(s):  
Corporate Governance ◽  
Middle East ◽  
Earnings Management ◽  
Audit Committee ◽  
Islamic Banks ◽  
Governance Mechanisms ◽  
Loan Loss ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to examine whether corporate governance mechanisms affect the reporting of loan loss provisions by managers in Islamic banks in the Middle East region. Design/methodology/approach This empirical study uses balanced panel data from 20 Islamic banks, from seven Middle East countries for the period 2007 to 2011. The regression model is estimated using random effects specifications. Findings The empirical results show that discretionary loan loss provisions (DLLP) are negatively related to board size and the existence of an audit committee. Results also report a positive relationship between sharia board size and DLLP. This indicates that small sharia supervisory boards are more effective than larger ones, which could be due to the higher costs and negative effects of large groups on decision-making. Results also highlight that the existence of scholars with accounting knowledge sitting on the sharia board reduces discretionary behavior. Additional results provide evidence that an external sharia audit committee is also found to reduce discretion in Islamic banks. The conclusions are found to be robust to endogeneity issues and potentially omitted variables. Practical implications The findings are potentially useful for regulators and shareholders. Regulators could use the findings to focus on corporate governance mechanisms that restrain earnings management practices in Islamic banks and implement regulations to strengthen them. Additionally, this study gives shareholders further insight which enables them to better monitor the actions of managers and thus increase their control over their investments. Originality/value This study provides two contributions to the literature on Islamic banking. First, to the authors’ knowledge, this study is only the second piece of research focused on the impact of corporate governance on earnings management in Islamic banks. Second, the authors have examined the effect of some new corporate governance mechanisms that have not been studied previously in the research literature.

Ownership structure and financial performance in Islamic banks

2014 ◽  
Vol 7 (2) ◽  
pp. 146-160 ◽  
Author(s):  
Sarra Ben Slama Zouari ◽  
Neila Boulila Taktak
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Empirical Evidence ◽  
Ownership Structure ◽  
Policy Implications ◽  
Bank Performance ◽  
Islamic Banks ◽  
Content Type ◽  
Islamic Bank ◽  
The Impact

Purpose – This study aims to investigate empirically the relationship between ownership structure (concentration and mix) and Islamic bank performance, with a special attention to the identity of the block investor (foreign, family, institutional and state). Design/methodology/approach – Regression analyses are conducted to test the impact of the identity of the first shareholders and the degree of concentration on Islamic bank performance, using a panel data sample of 53 Islamic banks scattered over > 15 countries from 2005 to 2009. Findings – Results suggest that ownership is concentrated at 49 per cent, and for 41 banks from the full sample, the ultimate owner is institutional. State investors come in second place, followed by family ultimate shareholders. Using return on assets and return on equity as performance measures, empirical evidence highlights the absence of correlation between ownership concentration and Islamic bank performance. It also reveals that the combined effort of family and state investors is beneficial to bank performance. Results also indicate that banks with institutional and foreign shareholders do not perform better. Empirical findings suggest that the financial crisis impacts negatively Islamic bank performance. Research limitations/implications – The use of dummy variables to measure the nature of the largest owner represents the main limitation of this study. This is due to the lack of information, as the percentage of the largest capital held referring to owner category was available only for some banks. Practical implications – This research has given a brighter insight into corporate governance and bank performance in selected Islamic banking institutions. Findings provided useful information to bank managers, investors and policy makers. Financial performance can be improved by identifying practices associated with ownership structure. So, it will have policy implications for Islamic banks as to how to improve their performance. Finally, different types of bank ownership have had different concerns about implementing corporate governance practices among Islamic banks. Originality/value – This work is the first of its kind for Islamic banks. It extends previous research by examining whether ownership structure (concentration and mix) affects performance. It also fills the gap in the literature by providing empirical evidence on a large sample involving data from 15 countries. Finally, manual data collection on ownership structure constitutes a large part of the research for this paper.

A consensus-based corporate governance paradigm for Islamic banks

2014 ◽  
Vol 6 (1) ◽  
pp. 93-108 ◽  
Author(s):  
Monal Abdel-Baki ◽  
Valerio Leone Sciabolazza
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Performance Metrics ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Content Type ◽  
Sustainable Finance ◽  
Market Driven ◽  
The Needy

Purpose – Islamic banking is a viable sustainable banking model that has shown resilience to financial crises. The aim of this research is to design a consensus-based ethical and market-driven corporate governance index (CGI) to boost financial performance and ensure compliance with Islamic rulings. Design/methodology/approach – The design of the CGI is the outcome of the feedback obtained from a cross-country survey to measure bank efforts in enhancing corporate governance (CG) throughout the ten-year period of 2001-2011. The CGI is divided into six core CG themes and 40 sub-themes. Findings – First, the results of the multiple regression analysis show a consistent positive relationship between CG and financial performance metrics. Second, the authors detect misaligned compensation structures for directors. Third, poor governance leads to higher risk exposures. Research limitations/implications – CG in Islamic banks is yet an evolving discipline and infant practice. This research aims to introduce a CGI that should be updated and improved as the discipline evolves. Practical implications – The research concludes by proposing a CG paradigm. The outcome of the research could also be of use to both Islamic banks and to the rapidly growing sustainable banking sector in designing a similar CGI and CG model incorporating the ethical features of sustainable finance. Social implications – The core ethos of Islam are: avoiding the exploitation of the needy, avoiding excessively risky transactions, avoiding unethical transactions and justice, equity and income redistribution. If properly applied, Islamic banking will display all features of sustainable finance as well as enhance social welfare. Originality/value – To the best of the authors' knowledge, this is the first CGI that is based on an ethical and all-inclusive input of all stakeholders.

scholarly journals Pengaruh Islamic Corporate Governance dan Islamic Social Reporting terhadap Kinerja Keuangan Bank Syariah di Indonesia

2021 ◽  
Vol 1 (1) ◽  
pp. 11-20
Author(s):  
Ibnu Trilaksono ◽  
◽  
Agrianti Komalasari ◽  
Chara Pratami Tidespania Tubarad ◽  
Yuliansyah Yuliansyah ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Commercial Bank ◽  
Banking Sector ◽  
Stock Exchange ◽  
Social Reporting ◽  
Bank Performance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Exchange Contribution

Abstract Purpose: This study examined the effect of Islamic Corporate Governance and Islamic Social Reporting on the Financial Performance of Islamic Banks in Indonesia at Sharia Commercial Bank Companies Listed on the Indonesia Stock Exchange. Research methodology: This study used multiple regression as the method to analyze the result of the research. By using 14 shariah banking data, this research will analyze the performance of the Indonesian general bank. Result: This study indicates that the variables that affect Islamic bank performance in this research are not implemented effectively. Limitations: The sample of this study was only 14 Islamic commercial banks and only used the Islamic banking sector in Indonesia, which is listed on the Indonesia stock exchange. Contribution: This research is helpful for further research. One of the guidelines in choosing which variabels to use and which one to use in the study should be understood in selecting Islamic financial performance.

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