Islamic banks’ equity financing, Shariah supervisory board, and banking environments

Meslier, Céline; Risfandy, Tastaftiyan; Tarazi, Amine

doi:10.1016/j.pacfin.2020.101354

Cited by 54 publications

(62 citation statements)

References 52 publications

(8 reference statements)

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“…In the past few decades, Islamic banks have rapidly grown in both number and size in many countries around the world because of the increasing demand from customers who are more inclined to engage with banks that comply with Sharīʿah principles (Lassoued, 2018; Aslam and Haron, 2020; Mesliera et al , 2020). According to Ulussever (2018), the financial assets of the Islamic financial sector grew 50% faster than the overall banking sector, with an annual growth average of 17.6% during the period 2008–2012 and reached US$1.7tn in 2013.…”

Section: Introductionmentioning

confidence: 99%

“…That’s why Islamic banks need to take customer satisfaction into account to ensure their credibility, which, in turn, increases bank stability and leads to higher market shares (Nomran et al , 2018). What distinguishes Islamic banks from their traditional counterparts is their governance structure following Sharīʿah-compliant characteristics and guided by the Shariah Board (Nomran et al , 2018; Mesliera et al , 2020). According to Buallay (2019), the Shariah Board is considered to be an independent body that covers the control and monitoring of Islamic banks’ activities to ensure Sharīʿah-compliance.…”

Section: Introductionmentioning

confidence: 99%

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Financial soundness of Islamic banks: does the structure of the board of directors matter?

Khalil

Slimene

2021

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Purpose The purpose of this paper is to examine the Board of Directors’ characteristics and their impact on the financial soundness of Islamic banks. Design/methodology/approach Regression analysis is applied to test the impact of the Board of Directors’ characteristics on the financial soundness of Islamic banks, using a panel data set of 67 Islamic banks covering 20 countries from 2005 to 2018. The Z-score indicator is used to evaluate the Islamic banks’ soundness. To check the robustness of the results, this paper uses other dependent variables (CAMEL) than the Z-score. Findings The main results show that the presence of an independent non-executive director negatively impacts the financial soundness of Islamic banks, while the chief executive officer duality practice has a positive effect on it. Other characteristics of the Board of Directors do not significantly impact the financial soundness of Islamic banks (foreign director, institutional director, chairman with a Shari’ah degree, interlocked chairman and the Board of Directors’ size). Practical implications This study aims to fill the gaps in the literature that discuss the Board of Directors’ role in corporate governance and its impact on the financial soundness of Islamic banks. In other words, it shows the role played by the Board of Directors and improves the knowledge of the corporate governance-financial soundness relationship. Plus, managers, investors and regulators may gain evocative insights, particularly those looking to improve their Islamic banks’ soundness by restructuring their boards’ composition. Originality/value This study sheds new light on the literature on Islamic banking by clarifying the relationship between the Board of Directors and the financial soundness of Islamic banks. Contrary to previous research, this paper uses an additional hypothesis stating that a chairman with a Shari’ah degree (Fiqh Muamalt) has a positive impact on the financial soundness of Islamic banks.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Financial soundness of Islamic banks: does the structure of the board of directors matter?

Khalil

Slimene

2021

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“…This study aimed to investigate Islamic finance and its relation to economic growth, focusing on debt-and equity-based financing. The research on Islamic bank-based and equity-based financing has not received sufficient attention [10,11]. Previous studies focused only on the conventional financial sector, such as the studies by Osoro and Osano [12] and Zhang, et al [13].…”

Section: Introductionmentioning

confidence: 99%

Achieving Sustainable Economic Growth: Analysis of Islamic Debt and the Islamic Equity Market

et al. 2021

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The financial sector is divided into two broad categories: equity and banking markets. The healthy functioning of these sectors plays an imperative role in any economy. This study aimed to examine the short- and long-term relationship between the Islamic financial sector (Islamic debt and Islamic equity market), and sustainable economic growth of the two economies with the largest Muslim populations. Quarterly data were collected from 2010 to 2019 for Indonesia and Pakistan. The study used autoregressive distributive lag (ARDL) and the error correction method (ECM). The results revealed that in the long run, the Islamic banking sector imparts a significant and positive effect on achieving sustainable economic growth in both countries. However, in the short run, the Islamic stock market was found to have a positive relationship with Pakistan, while the Islamic banking sector had a positive and significant relationship with economic growth in Indonesia.

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“…This is because Shari'ah requirements in the IFSA act stipulate that banks are required to provide accurate and complete information to the board committee (Bank Negara Malaysia, 2013). Furthermore, Meslier et al (2020) found that having many experts on Shari'ah supervisory boards would reduce agency costs and effectively monitor bank managers. This monitoring could ensure that banks are not misled by corruption in bank lending, thereby improving their function as intermediaries.…”

Section: Baseline Regressionsmentioning

confidence: 99%

Islamic Regulations and Islamic Banks Margins: an Empirical Investigation Into Asean Countries

Khan

Malim

Masron

2021

JIMF

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This paper examines the impact of Islamic regulations on Islamic bank margins in ASEAN countries, utilising the fixed-effect method. The sample consists of 27 Islamic banks in Malaysia, Indonesia, Singapore and Thailand covering the period 2009 to 2017. The results suggest that Islamic regulations, such as the Islamic regulatory framework and Shari’ah supervisory board, are negatively associated with Islamic bank margins. These results have important policy implications for regulators, indicating that they should impose a separate regulatory framework for Islamic banks and bank managers to increase the number of Shari’ah scholars on the Shari’ah board in lowering Islamic bank margins. Overall, the findings suggest that Islamic banks should adopt regulations that should follow Shari’ah requirements, as they help to lower the cost of financial intermediation. As for the other control variables, only the Lerner index has a positive and significant impact on ASEAN Islamic bank's margin. Therefore, appropriate policies are necessary to foster competition in Islamic banks.

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Islamic banks’ equity financing, Shariah supervisory board, and banking environments

Cited by 54 publications

References 52 publications

Financial soundness of Islamic banks: does the structure of the board of directors matter?

Financial soundness of Islamic banks: does the structure of the board of directors matter?

Achieving Sustainable Economic Growth: Analysis of Islamic Debt and the Islamic Equity Market

Islamic Regulations and Islamic Banks Margins: an Empirical Investigation Into Asean Countries

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