Corporate governance of Islamic banks

Rihab Grassa · Hamadi Matoussi

145 citations0/0 files storedInternational Journal of Islamic and Middle Eastern Finance and Management

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Islamic Finance and Banking Studies Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

Purpose – This paper aims to understand the current governance practices and governance structure of Islamic banks (IBs) in Gulf Cooperation Council (GCC) and Southeast Asia countries with the purpose of providing relevant information in guiding the future development of the governance system for IBs. As well, the paper discusses and compares the state of the governance system in GCC countries (Kuwait, Bahrain, United Arab Emirates, Qatar and Saudi Arabia) and Southeast Asia countries (Malaysia and Indonesia). Design/methodology/approach – The study utilizes descriptive analysis approach in extracting and analyzing data collected for 83 IBs observed for the period 2002-2011. The authors test for differences in means and medians of corporate governance attributes between a sample of IBs in GCC countries and another one for Southeast Asia countries. They use selected variables of corporate governance of different governance structures, namely, the ownership structure, the board of directors, the Shariah board and the CEO attributes. Findings – The paper findings argue that there are significant differences and divergence of corporate governance structure of IBs in GCC countries and those in Southeast Asia countries. This position acknowledges that there are shortcomings to the existing governance framework for IBs which needs further improvement and standardization. Practical implications – The paper is a very useful source of information that may provide relevant guidelines in guiding the future development of corporate governance of IBs. As well, the paper provides relevant guidelines for improving regulations and laws covering the governance of IBs. Originality/value – This paper provides fresh data and recent information on the actual corporate governance system in IBs in GCC and Southeast Asia countries. As well, the paper discusses a significant shortage in corporate governance literature of Islamic finance.

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References

1997A Survey of Corporate Governance 1993The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems 2003Is Corporate Governance Different for Bank Holding Companies?2011A Survey on Shari’Ah Governance Practices in Malaysia, GCC Countries and the UK 1993Information, Ownership Structure, and Shareholder Voting: Evidence from Shareholder-Sponsored Corporate Governance Proposals 2003Accounting Quality, Auditing, and Corporate Governance 2011A survey on Shari'ah governance practices in Malaysia, GCC countries and the UK 2013Do Islamic Banks Employ Less Earnings Management?

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2015Bank performance and board of directors attributes by Islamic banks 2020Does corporate governance affect the performance of Islamic banks? New insight into Islamic countries 2013Shariah supervisory system in Islamic financial institutions 2017Corporate governance: evidence from Islamic banks 2022The development of corporate governance literature in Malaysia: a systematic literature review and research agenda

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