Purpose: This study emphasis on cost, which is the most essential form of efficiency that can be attained when a company identifies inputs that allow it to get the required results at the lowest possible cost. This study concentrates only on the Islamic banking sector in Pakistan and aims to observe the impact of cost efficiency on Islamic banks performance with moderating role of Shar¯ı‘ah Supervisory Board (SSB) attributes such as size, qualification, cross membership, expertise and annual change in composition. Methodology: The study uses data envelopment analysis technique to measure the cost efficiency of Islamic banks. The data has been collected through 13 Islamic banks’ annual reports over the period of 2005 to 2018. Bank performance has been measured using two indicators: return on asset and return on equity and the panel data regression analysis is employed. Findings: The study reports a significant positive association among the cost efficiency and Islamic banks performance. Additionally, the study also establishes that SSB attributes such as size of board, qualification, expertise , and cross membership, annual change in composition moderates the significant association among cost efficiency and Islamic banks performance in Pakistan. Significance: This study has useful implications for managers and investors operating in international settings. In addition, they will act as a source of information for policy makers and the top management of Islamic banking sector. Academic researchers engaged in Islamic banking might get insight from this study by better understanding the importance of efficiency-enhancing components.
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