On intellectual capital efficiency and shariah governance in Islamic banking business model

Abstract

This paper empirically investigates whether intellectual capital (IC) and shariah governance jointly affect the economic performance of Islamic banks (IBs). In contrast to prior research, this paper disaggregate IC and corporate governance features and examine whether the two are jointly related to economic performance. These relationships are further explored before, during and after the financial crisis based on a sample of 64 Islamic banks operating in different regions during the period 2007–2014. The required data to calculate different constituents of IC efficiency and governance mechanism is hand collected from 512 annual reports. After controlling for other corporate governance and bank‐specific characteristics (operational type, bank size, listing status, risk, type of auditor, accounting standard and region), we find both intellectual capital efficiency and shariah governance proxies (size and dominance of prominent scholars of shariah supervisory board) to have a significant positive relationship with accounting measure of performance. However, based on market performance measure, only one proxy for shariah governance mechanism, that is, prominent scholars on SSB, is found to be significant but in the negative direction. These results provide important insights into the relationship between IC efficiency, corporate governance and performance in Islamic banking business model and have policy and practical implications.

Nexus between intellectual capital and profitability with interaction effects: panel data evidence from the Indian healthcare industry

“…The review of related studies measuring the relationship between the intellectual capital coefficient and performance highlights the fact that most studies (Riahi-Belkaoui, 2003; Mavridis, 2004; Youndt et al , 2004; Wang and Chang, 2005; Ng, 2006; Tan et al , 2007; Tovstiga and Tulugurova, 2007; Zeghal and Maaloul, 2010; Clarke et al , 2011; Mondal and Ghosh, 2012; Mehralian et al , 2012; Joshi et al , 2013; Meles et al , 2016; Vishnu and Gupta, 2014; Singh et al , 2016; Kehelwalatenna, 2016; Ozkan et al , 2017; Anifowose et al , 2017; Hamdan, 2018; Kengatharan, 2019; Oppong et al , 2019; Singla, 2020; Nawaz et al , 2020) provide evidence of a significant positive relationship between the intellectual capital coefficient and firm profitability. However, exceptions to this have been reported by a few studies (Williams, 2001; Firer and Williams, 2003; Chu et al , 2011; Gruian, 2011; Maditinos et al , 2011; Chang and Hsieh, 2011; Stahle et al , 2011; Iazzolino and Laise, 2013) claiming a significant negative relationship or no relationship between the intellectual capital coefficient and firm profitability.…”

Social Awareness and Creativity Enhancement Program Through E-Learning Platform: A Case of Maizbhander Foundation's Meddhabikash Program, Fatikchari, Bangladesh

“…Such Shari'ah noncompliant income will be discarded from the banks' books, resulting in net-losses on these transactions for the Islamic bank (Basiruddin & Ahmed, 2019), hence the need for available and capable SC members. Also, Shari'ah non-compliance can damage the reputation of IBs and decrease the confidence of depositors, investors, customers, and other stakeholders (Nawaz et al, 2020).…”

Sharīʿah governance and agency dynamics of Islamic banking operations in the Kingdom of Saudi Arabia

“…To address the agency issues, financial institutions have adopted different governance systems (Beasley, 1996; Bebchuk et al , 2004; Nomran and Haron, 2019; Nawaz et al , 2021). The problems associated with agency in Islamic banking operations call for a separate investigation.…”