Evaluation Study: Does The Sharia Supervisory Board Have A Direct Effect on Profitability?

Abstract

<jats:p>Previous studies have indicated a complex relationship between the total Sharia Supervisory Board (SSB) members and profitability. Therefore, this study suspects that financing products and bank fundraising mediate the relationship between SSB and ROA. SSB can provide consultation and supervision on the implementation of bank products. Data were obtained from 12 Islamic commercial banks in Indonesia with a 10-year observation period (2009-2018). Data were analyzed using fixed and random effect models and path analysis. The results showed that the total SSB members and their expertise did not have a direct effect on ROA. However, it has an effect on financing and none on Investment Account Holders (IAH) funds. The results also showed that financing proved to be a mediating variable on the effect between the total and expertise of SSB members towards ROA. The IAH fund is the mediating variable on the effect between the total SSB members towards ROA, with no proven relationship. Therefore, it can be concluded that SSB has an indirect effect on ROA by strengthening the financing and bank fundraising quality. Consultation and supervision carried out by SSB on the implementation of IAH financing and fundraising, has proved to have an impact on improving bank profitability</jats:p>

The role of the sharia supervisory board in the relationship of third-party fund and profits

“…Credibility and trust in Islamic banks can also decrease due to the sharia violations that escape the supervision of SSB (Prabowo & Jamal, 2017). This is in line with research by Mukhibad & Anisykurlillah (2020) which explains that the role of SSB in consulting and supervising the collection of funds and financing has an impact on bank profitability. However, a different result was stated by Zuliana & Aliamin (2019) and Pramono & Widiarto (2019) that SSB actually had a negative effect on the performance of Islamic banks in Indonesia.…”

“…This means that the level of profitability of Islamic banks originating from non-Islamic income will be determined by the SSB, so that the tendency of increasing TPF which triggers an increase in profit also depends on the effectiveness of SSB supervision. Based on research by Mukhibad & Anisykurlillah (2020), the Sharia Supervisory Board (SSB) has an indirect influence on Return on Assets (ROA) by strengthening bank fundraising. Therefore, this study examines the role of SSB as a moderator that will strengthen or weaken TPF to earnings.…”

The Indonesian Experience in Sharia Bank’s Financial Performance Based on Index of Islamic Social Reporting and Sharia Supervisory Board

“…Higher education's background does not necessarily guarantee someone to make strategies and make the best decisions in solving problems in the company. This research is in line with [29]. On the contrary, it is not in line with the research [28].…”

“…The educational qualification can help attract potential investors, increasing Islamic banks' productivity and performance [28]. Meanwhile, [29] stated that SSB expertise has no direct effect on ROA. The conceptual framework of this study can be seen in Figure 1.…”

Women in the Boardroom and Financial Soundness-Study at Islamic Banks in Southeast Asia

“…at 1%, 5%, and 10%. We use the robust standard error to solve the problem of heteroscedasticity [28] Shariah [33,34]. Therefore, the SSB members who have clerical backgrounds and religious experts collaborate with other boards in carrying out its functions.…”