Shari’Ah Supervision, Corporate Governance and Performance: Conventional vs. Islamic Banks

39 Pages Posted: 21 Apr 2015 Last revised: 29 Jul 2015

See all articles by Sabur Mollah

Sabur Mollah

Sheffield University Management School, University of Sheffield; Swansea Management School, Swansea University; Hull University Business School; Hull University Business School

Mahbub Zaman

Hull University Business School

Date Written: April 18, 2015

Abstract

The performance and accountability of boards of directors and effectiveness of governance mechanisms continue to be a matter of concern. Focusing on differences between conventional banks and Islamic banks, we examine the effect of (i) Shari’ah supervision boards, (ii) board structure and (iii) CEO-power on performance during the period 2005-2011. We find Shari’ah supervision boards positively impact on Islamic banks’ performance when they perform a supervisory role, but the impact is negligible when they have only an advisory role. The effect of board structure (board size and board independence) and CEO power (CEO-chair duality and internally recruited CEO) on the performance of Islamic banks is overall negative. Our findings provide support for the positive contribution of Shari’ah supervision boards but also emphasize the need for enforcement and regulatory mechanism for them to be more effective.

Keywords: Shari’ah Supervision, Corporate Governance, Islamic Banks, Boards of Directors, Ethical Banking.

JEL Classification: G34, G21, G01

Suggested Citation

Mollah, Sabur and Zaman, Mahbub, Shari’Ah Supervision, Corporate Governance and Performance: Conventional vs. Islamic Banks (April 18, 2015). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2596100

Sabur Mollah (Contact Author)

Sheffield University Management School, University of Sheffield ( email )

Conduit Road
Sheffield, Sheffield S10 1FL
United Kingdom

Swansea Management School, Swansea University ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Great Britain HU6 7RX
United Kingdom

Hull University Business School ( email )

Cottingham Road
Hull, Hull HU6 7RX
United Kingdom

Mahbub Zaman

Hull University Business School ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://www.mahbubzaman.com

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