The mediating role of intellectual capital in corporate governance and financial efficiency of Islamic banks

Abstract

Purpose The purpose of this study is to investigate the mediating role of intellectual capital (IC) on the association between corporate governance mechanism (CGM) and the financial efficiency of Islamic banks (Z-score, net investment income and loan to deposit) and verify it through standard mediation in the panel based on interaction. Design/methodology/approach The data of this study draws from 125 full-fledged Islamic banks and windows from 26 Organization of Islamic Cooperation (OIC) over the period of 2009 to 2019. A two-step system generalize method of moment estimation is used to test the hypotheses. Findings The results underwrite that the inclusion of IC as a mediating variable has influenced positively the corporate governance and financial efficiency of IBs. Besides, only CEO power and Shariah supervisory board positively affect the financial efficiency of IBs. While structural capital and relational capital positively affect the financial efficiency of IBs. Apart from that, results show that the CGM has a significant relationship with the IC value of IBs. Research limitations/implications These findings are valuable for policymakers and regulators to set policies to improve CG structure and effective use of IC resources to improve banking efficiency. Additionally, findings might be helpful for the bankers to proficiently use the IC as a premise to plan new strategies to get an upper hand in financial performance. Originality/value This study extends and contributes to the current literature by analysing the role of IC along with CG to boost the financial efficiency of banks in OIC countries.

Human capital and financial performance of Islamic banks: a meta-analysis

“…The knowledge, skills and abilities required from human capital in Islamic banking (Table 1) include but not limited to the knowledge of Shariah (Adznan et al, 2022;Ali et al, 2020;Ali and Kasim, 2019;Haron, 2020, 2021;Asutay and Ubaidillah, 2023;Basak et al, 2022;Belal et al, 2019;Farooque et al, 2023;Muafi et al, 2017;Nawaz et al, 2021;Ousama et al, 2020;Pratama et al, 2022), honesty, transparency, trustworthiness, personal development based on worship, faith, science, charity and missionary endeavor, high integrity, application of values of justice (Supriyatni, 2021;Suryadi et al, 2023), understanding of Islamic economics, Islamic finance and Islamic accounting and auditing (Aslam et al, 2023;Belal et al, 2019;Dahlifah and Nopia, 2017;Muhammad and Nugraheni, 2022;Nawaz, 2019b;Prasojo et al, 2022b;Pratama et al, 2022) (Aslam et al, 2023;Aslam and Haron, 2020;Basak et al, 2022;Nawaz, , 2019b, ability of innovation and creativity (Aslam et al, 2023;Aslam and Haron, 2020;Basak et al, 2022;Dahlifah and Nopia, 2017;Nawaz, , 2019b, adherence to religious trust and beliefs (Basak et al, 2022), ability to research (Akkas and Asutay, 2022b;Aslam et al, 2023), commitment to Islamic normative principles (Akkas and Asutay, 2022b;Belal et al, 2019), risk management (Aslam et al, 2023), knowledge of Shariah-compliant bank...…”

“…Return on assets (ROA) is one of the most widely used measures of financial performance, used in several studies such as Nawaz and Haniffa (2017), Ousama and Fatima (Ousama and Fatima, 2015), Akkas and Asutay (2022a) and many others Asutay, 2022b, 2022a;Aslam et al, 2023;Basak et al, 2022;Buallay, 2019;Buallay et al, 2019;Haris et al, 2018;Musibah and Alfattani, 2014;Nawaz, , 2019bNawaz et al, 2021;Ousama et al, 2020;Prasojo et al, 2022aPrasojo et al, , 2022bSaruchi et al, 2019;Setyawati et al, 2019;Wahyuni et al, 2023;Yahya and Ibrahim, 2021). ROA measures a bank's ability to generate profits from its assets, including human capital.…”

“…There are several studies that has taken sample of multiple countries (Akkas and Asutay, 2022a;Aslam et al, 2023;Aslam and Haron, 2021;Nawaz et al, 2021;Nawaz and Haniffa, 2017;Prasojo et al, 2022aPrasojo et al, , 2022bRehman et al, 2022;Saruchi et al, 2019), provide a comprehensive result related to human capital and financial performance dynamics within the broader context of Islamic banking. Within this global perspective, there are also studies that focused into specific countries and regions.…”

“…, 2022b; Pratama et al. , 2022), customer service excellence (Aslam et al. , 2023; Aslam and Haron, 2020; Basak et al.…”

“…, 2023; Aslam and Haron, 2020; Basak et al. , 2022; Nawaz, 2017, 2019b), ability of innovation and creativity (Aslam et al. , 2023; Aslam and Haron, 2020; Basak et al.…”