Corporate Governance, Islamic Governance and Financial Flexibility

47 Pages Posted: 3 Dec 2020

See all articles by Abdullah Aljughaiman

Abdullah Aljughaiman

affiliation not provided to SSRN

Aly Salama

University of Newcastle - Newcastle University Business School

Thanos Verousis

University of Essex

Date Written: October 21, 2020

Abstract

In this paper, we investigate the relationship between corporate governance structures and financial flexibility for conventional and Islamic banks in the Middle East and North Africa region. We construct a novel financial flexibility index for the banking sector. We show that corporate governance has a significant effect on banks’ financial flexibility. However, Shari’ah governance rules determine how that relationship is manifested in Islamic banks. Our results show that Western corporate governance structures and one-size-fits-all approaches to corporate governance may lead to suboptimal financial flexibility positions. Importantly, we show that “soft policies” to banking regulation are value-enhancing for the banking sector.

Keywords: Corporate Governance, Islamic banking, Financial Flexibility, MENA region

JEL Classification: G21, G32, G34

Suggested Citation

Aljughaiman, Abdullah and Salama, Aly and Verousis, Thanos, Corporate Governance, Islamic Governance and Financial Flexibility (October 21, 2020). Available at SSRN: https://ssrn.com/abstract=3716197 or http://dx.doi.org/10.2139/ssrn.3716197

Abdullah Aljughaiman

affiliation not provided to SSRN

Aly Salama

University of Newcastle - Newcastle University Business School ( email )

5 Barrack Road
Devonshire Building
NEWCASTLE UPON TYNE, NE1 7RU
United Kingdom

Thanos Verousis (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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