Shari’ah Governance Disclosure: A Key to Financial Success through Governance Mechanisms in Islamic Banks

PurposeThis paper aims to assess the effects of deposits structure and ownership structure on the GCC Islamic banks’ corporate governance disclosure (CGD) practices.Design/methodology/approachThe study is based on a sample of 38 Islamic banks operating in five Gulf Cooperation Council (GCC) countries, and the authors observed them over the period from 2006 to 2011. The authors used the transparency and disclosure score, developed by Standard & Poor’s (S&P), to identify the sample’s CGD scores.FindingsThis paper’s findings suggest that the level of CGD is lower for Islamic banks with higher ownership concentration, for levered Islamic banks and for Islamic banks with greater concentration of nonprofit-sharing investment accounts (PSIA) and is higher for Islamic banks with greater concentrations of PSIA; the Islamic bank size; the bank age; listed bank and the country transparency index. By disaggregating the total CGD into the three sub-categories, the authors are able to specify, also, the components of corporate governance (CG) impacted by various determinants.Research limitations/implicationsThis paper is subject to a number of limitations. First, there is manual scoring of annual reports (subjectivity). Second, the research focuses exclusively on the GCC context and excludes the other Middle East, Southeast Asia and Far East countries, where ownership structure and deposits structure might affect CGD differently. Third, the governance score, which is used in this research, is developed by S&P and does not take into account the characteristics of Islamic banks.Practical implicationsThe findings of this paper suggest many policy implications. First, through the optimization of ownership structure, GCC countries’ regulators have to improve the Islamic banking system’s CG mechanisms through the optimization of ownership structure (dispersed ownership) to promote transparency and disclosure. Second, regulators and policymakers should revise guidelines with the main purpose of protecting PSIA’ holders (considered to be minor shareholders without voting power) through promoting disclosure and transparency. Third, the findings can be useful for many international supervisory bodies, like the Islamic Financial Services Board (IFSB) and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), in evaluating transparency and disclosure standards.Originality/valueThis study is expected to be useful for all market participants, namely, investors, financial analysts, managers, marker regulators and many international Islamic supervisory bodies, such as the IFSB and AAOIFI, by providing new requirements on CGD in the GCC region and in better understanding its determinants for Islamic banks in this region.

This study explores how corporate governance (CG) disclosure influences the relationship between governance mechanisms and the financial performance of Islamic banks in Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions.Using panel data analysis and structural equation modelling (SEM), data from 33 Islamic banks in SEA and 46 in the GCC, covering the period from 2012 to 2021, was analysed to capture both pre-and post-COVID-19 effects.The study examines various governance mechanisms, including corporate governance practices, Shari'ah supervisory boards (SSBs), and legal systems.The findings show that strong governance mechanisms positively affect bank performance, with CG disclosure playing a key role in this relationship.Specifically, CG disclosure has an independent positive impact on bank performance.The research highlights that effective governance structures, such as SSBs and strong legal frameworks, lead to better performance.It also stresses the importance of precise CG disclosure requirements to improve financial stability and trust in Islamic banks.This study offers valuable insights into how Islamic governance mechanisms, especially those aligned with Shari'ah principles, influence the performance of banks, and provides a basis for future research in this field.

Purpose This paper aims to examine the effect of dual board governance structure, i.e. Shari’ah supervisory board (SSB) and board of directors (BoD), on the performance of Islamic banks (IBs) in Southeast Asia region versus banks in the Gulf Cooperation Council (GCC) region. Design/methodology/approach This study uses a sample of 45 IBs over seven countries covering the period of 2007-2015 based on the GMM estimator – First Difference (2-step). Findings The findings reveal that SSB and BoD for IBs in both regions are segmented in terms of ROA (negative interaction) and integrated in terms of Zakat ratio (Zakat on equity [ZOE]) (positive interaction) only for Southeast Asia region. Furthermore, SSBs positively affect multi-bank performance in Southeast Asia while its effect is absent for GCC. This suggests that Shari’ah governance practices for IBs in Southeast Asia are stronger compared to GCC IBs. Finally, BoD has a significant association with low ZOE for IBs in both the regions. Research limitations/implications The implications of this research is that the unique agency theory depicted in this study can be inferred when analyzing how dual board structure affects IBs' performance. Practical implications For regulators in both regions, SSBs must be given real power to monitor BoD. They should also balance the number of SSB scholars with experience in Shari’ah, as well as in law, accounting and finance. It is also important that such a balance of scholars with PhD in these areas be required for Southeast Asia IBs. For the GCC’s regulators, CG practices need to be improved by giving due importance to SSB characteristics and BoD structure. Originality/value Though the effects of dual board structure on IBs' performance has been previously examined in the literature, only SSB size has been used as a single proxy of SSB governance. Furthermore, no empirical evidence is recorded to date on this issue in Southeast Asia and the GCC regions. One of the innovations of this paper is the use of multi-bank performance measures in the IBs performance and corporate governance.

Background - The growth potential of sharia banking business in Indonesia is increasing, so it is important to evaluate the performance of sharia banking. Aim - This study aims to examine the effect of core capital on the profitability and performance of Islamic Commercial Banks listed on the Indonesia Stock Exchange. This research is expected to provide input in financial knowledge, especially in the field of evaluating bank financial performance and the factors that influence it. Design/ Methodology/ Approach - The research object is 12 Islamic banks in Indonesia. The data is taken from the financial statements of each Islamic bank from 2015 to 2018. Hypothesis testing is carried out using a structural equation model with the WARP PLS program. Results and Discussion – The results show that core capital has a significant effect on profitability, as well as profitability has a significant effect on core capital. The results also show that core capital has no effect on performance and performance has no significant effect on core capital. The results showed that profitability had no effect on performance. Conclusion - The results of this study conclude that of the five hypotheses proposed only two are accepted, namely core capital has a significant effect on profitability, and vice versa profitability also has a significant effect on core capital. This study produces evidence that core capital has no significant effect on the performance of Islamic banks. Likewise, it turns out that profitability also does not significantly affect the performance of Islamic banks, but on the contrary, the performance of Islamic banks has no significant effect on profitability. Research implications - for the Islamic banking business, this research can provide input on how to measure the performance of Islamic banks through the profitability and core capital of Islamic banks. The object of research is 12 Islamic banks in. Limitations of the study - The research was carried out during the period when Islamic banks in Indonesia had not been merged

Background - The growth potential of sharia banking business in Indonesia is increasing, so it is important to evaluate the performance of sharia banking. Aim - This study aims to examine the effect of core capital on the profitability and performance of Islamic Commercial Banks listed on the Indonesia Stock Exchange. This research is expected to provide input in financial knowledge, especially in the field of evaluating bank financial performance and the factors that influence it. Design/ Methodology/ Approach - The research object is 12 Islamic banks in Indonesia. The data is taken from the financial statements of each Islamic bank from 2015 to 2018. Hypothesis testing is carried out using a structural equation model with the WARP PLS program. Results and Discussion – The results show that core capital has a significant effect on profitability, as well as profitability has a significant effect on core capital. The results also show that core capital has no effect on performance and performance has no significant effect on core capital. The results showed that profitability had no effect on performance. Conclusion - The results of this study conclude that of the five hypotheses proposed only two are accepted, namely core capital has a significant effect on profitability, and vice versa profitability also has a significant effect on core capital. This study produces evidence that core capital has no significant effect on the performance of Islamic banks. Likewise, it turns out that profitability also does not significantly affect the performance of Islamic banks, but on the contrary, the performance of Islamic banks has no significant effect on profitability. Research implications - for the Islamic banking business, this research can provide input on how to measure the performance of Islamic banks through the profitability and core capital of Islamic banks. The object of research is 12 Islamic banks in. Limitations of the study - The research was carried out during the period when Islamic banks in Indonesia had not been merged

Purpose Merger and acquisition (M&A) plays an important role in developing the financial sector. The purpose of the paper is to analyze and evaluate the effects of M&As on the outcome of Islamic and conventional banks. Furthermore, examines the mediating role of market structure between M&A and bank outcome. Design/methodology/approach This paper uses POLS, panel data techniques and structural equation modeling to analyze a set of samples for 24 banks consisting of 10 Islamic banks and 14 conventional banks involved in M&A from 2004Q1 to 2020Q4 from 6 countries. Findings Generally, M&A improves the post-M&A performance of Islamic banks and conventional banks. However, there is size issue. Bank size positively affects Islamic bank performance while conventional does not. Furthermore, market structure mediates the relationship between M&A and the operational performance of Islamic and conventional banks. Implying that after M&A, the market becomes concentrated while it reduces competition. Research limitations/implications Number of banks are limited due to unavailability of data for pre and post-M&A. Future researches can be carried out to study the cross-border M&A along with the regulation between Islamic banks in GCC and Asia Pacific countries. Practical implications Improving operational performance plays a significant role. To enhance the performance of Islamic banking industry, M&A between small Islamic banks could be beneficial depending on the market structure. Originality/value The mediation role of market structure in between M&A and performance for Islamic and conventional banks is the main contribution of the study.

PurposeThe purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to investigate how patterns of risk and efficiency vary between conventional and Islamic banks and to critically evaluate how the profitability of conventional and Islamic banks varies following the financial crisis.Design/methodology/approachThis study uses univariate and multivariate statistical techniques by investigating 12 Islamic banks and 34 conventional banks operating in the Gulf Cooperation Council (GCC) region has been studied over the period 2011–2018.FindingsThe results suggest that Islamic and conventional banks differ not in the levels of efficiency, risk and profitability, but rather in how risk and efficiency influence banks’ financial performance. Islamic banks are found to be less influenced by the adverse effects of credit risk, which is consistent with the risk-sharing nature of Islamic financing. However, the results only hold for return on assets (ROA) and return on equity (ROE) while the net interest margin is observed to be negatively influenced by credit risk. Lower cost-income efficiency is also found to boost ROA and ROE of Islamic banks which could be attributed to a larger share of non-interest revenues due to Sharīʿah-compliance.Research limitations/implicationsFrom a theoretical point of view, this study helps to understand the risk, efficiency and financial performance of Islamic banks in comparison with conventional banks.Practical implicationsThe results of this study can serve bank managers, regulators and shareholders. Policymakers should encourage a more risk-sharing structure of Islamic financing as it brings less adverse effects of credit risk and increases income sustainability for Islamic banks. The present study may help bank managers to improve the financial performance of their firms by controlling risk and efficiency. The study results also have implications for shareholders and depositors of Islamic and conventional banks as they should have a predetermined position about the level of credit risk and efficiency in each banking system.Originality/valueThe foremost contribution is that this is one of the few studies to compare risk, efficiency and financial performance of Islamic and conventional banks in the GCC region. By using the latest data, this paper hopes that the findings will be more relevant than previous studies to the current situation of the banking industry in the region.

The outbreak of COVID-19 in early 2020 has caused a crisis in various sectors, including the economic sector. In fact, its impact on the performance of Islamic banks in the ASEAN region is currently still unknown. Therefore, this study aims to obtain empirical evidence regarding the effect of COVID-19 on profitability performance and maqashid sharia performance in Islamic banks in the ASEAN region. Profitability performance is measured by return on equity (ROE) and return on assets (ROA). The number of observations from this study was 202 with a sample of 30 Islamic commercial banks in the ASEAN region in 2015–2021. The data analysis technique used is EViews 12. The results show that COVID-19 has no significant effect on profitability performance in Islamic banks, whether measured by ROE or ROA. On the other hand, COVID-19 has a significant effect on reducing the maqashid sharia performance. In addition, company size has been proven to positively affect profitability performance and maqashid sharia performance in Islamic banks before and after the COVID-19 pandemic. Operating expense ratio (OER) has been proven to affect ROE and ROA, whereas FDR and non-performing financing (NPF) have been proven to only affect ROA. OER influences promoting welfare, while FDR and NPF influence establishing justice. The study results confirm the ability of Islamic banks to generate profits amidst the COVID-19 pandemic. They also confirm the negative impact of the COVID-19 pandemic on three aspects of maqashid sharia performance.

Corporate Social Responsibility and Financial Performance in Islamic Banks

Banking has a significant influence on the economic activities of a country. The banking sector in Indonesia is currently experiencing rapid growth. One of the banks that is growing rapidly is Islamic banking. The development of Islamic banking must demonstrate sufficient performance in building trust among shareholders in their investments. To achieve this trust, it is necessary to measure the performance of Islamic banks, hence the need for a tool that can evaluate and measure the performance of these Islamic banks. The assessment of the financial performance of Islamic banks not only focuses on financial aspects but also requires an evaluation of their performance in accordance with Sharia principles to build trust among stakeholders. This research aims to determine the performance level of registered Islamic commercial banks in the financial services authority using the Islamicity Performance Index and RGEC methods for the years 2017-2021. This type of research is descriptive research with a quantitative approach. Data were obtained through documentation techniques. Data analysis techniques utilized the Islamicity Performance Index and RGEC methods. This research introduces novelty in its research methodology. Many studies typically focus on a single method, while this research employs two methods simultaneously. Additionally, this study utilizes the most recent data. The type of research is descriptive research using a non-statistical quantitative approach. The data used in this study are secondary data. The data collection technique in this research is the documentation method. The sampling technique in this study is non-probability sampling. The data analysis technique in this research involves descriptive statistical analysis using the Islamicity Performance Index and RGEC methods. The research results indicate that the assessment of the performance level of Islamic commercial banks using the Islamicity Performance Index method for the years 2017-2021 falls under the category of less satisfactory in terms of spirituality. The values for the respective years were 2.375, 2.375, 2.5, 2.5, and 2.625. The evaluation of the performance of Islamic commercial banks using the RGEC method in 2017 showed that the banks' performance was in Composite Rank 3 (PK-3) with a score of 66.67%, indicating a moderately healthy category. Meanwhile, for the years 2018-2021, the performance of the banks was in Composite Rank 2 (PK-2) which falls under the healthy category, with scores of 80%, 80%, 76.67%, and 76.67% respectively. The suggestions from this research are that Islamic commercial banks should be able to improve the company's profits, zakat, dividend distribution, and qard & donation. The banks are also expected to enhance their effectiveness in obtaining company profits, as some banks are still experiencing negative profit values. Subsequent researchers are encouraged to conduct further research, including accuracy testing on the Islamicity Performance Index and RGEC methods.

Sharia governance constitutes a fundamental pillar in ensuring the legitimacy, credibility, and sustainability of Islamic financial institutions (IFIs). Unlike conventional governance frameworks, Sharia governance integrates corporate governance principles with Islamic jurisprudence, aiming to ensure that all financial activities comply with Sharia principles. As the global Islamic finance industry continues to expand, particularly in Muslim-majority countries such as Indonesia, Malaysia, and Gulf Cooperation Council (GCC) states, the effectiveness of Sharia governance practices has become a critical concern for regulators, practitioners, and scholars. This study aims to systematically review and synthesize existing literature on Sharia governance practices in Islamic financial institutions using a qualitative systematic literature review and conceptual approach. The review draws on peer-reviewed international and national journal articles, regulatory documents, and institutional reports published over the last two decades. The analysis focuses on key components of Sharia governance, including the role of Sharia Supervisory Boards (SSBs), internal Sharia audit mechanisms, governance disclosure, and regulatory frameworks established by standard-setting bodies such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB). The findings indicate that while formal Sharia governance structures have been widely adopted, their implementation varies significantly across jurisdictions due to differences in regulatory enforcement, institutional capacity, and scholarly interpretation of Sharia principles. Empirical evidence from Indonesia demonstrates rapid growth in Islamic financial assets exceeding IDR 1,028 trillion in 2025 yet highlights persistent challenges related to SSB independence, effectiveness, and governance transparency. This study contributes by offering a comprehensive conceptual understanding of Sharia governance practices and identifying key gaps between regulatory expectations and operational realities. The findings are expected to provide insights for policymakers, regulators, and Islamic finance practitioners seeking to strengthen Sharia governance frameworks and enhance institutional accountability.

To date, several studies have been devoted to comparatively examine the performance of Islamic banks to its conventional counterparts with mixed results. Given these inconclusive findings, the purpose of the study is to systematically review 73 samples of past journals and published thesis related to the performance of Islamic and conventional banks subject to regional and period of study. The results reported from past studies are systematically analysed using meta-analysis approach to effectively estimate the size of effect of the implementation of Islamic banking system to the overall performance of Islamic banks relative to conventional banks. Based on meta-analysis, in overall, there is no significant difference of performance between Islamic and conventional banks. In term of regional aspect, Pakistan, Bangladesh and Malaysia showcase better performance of Islamic banks in comparison to conventional banks. Further, Islamic banks perform better during short-term period while long-term studies show the domination of conventional banks. From policy implication, this study suggests that Islamic banks can perform better than its counterparts in a region that has strong government initiatives and community awareness in Islamic finance.

To date, several studies have been devoted to comparatively examine the performance of Islamic banks to its conventional counterparts with mixed results. Given these inconclusive findings, the purpose of the study is to systematically review 73 samples of past journals and published thesis related to the performance of Islamic and conventional banks subject to regional and period of study. The results reported from past studies are systematically analysed using meta-analysis approach to effectively estimate the size of effect of the implementation of Islamic banking system to the overall performance of Islamic banks relative to conventional banks. Based on meta-analysis, in overall, there is no significant difference of performance between Islamic and conventional banks. In term of regional aspect, Pakistan, Bangladesh and Malaysia showcase better performance of Islamic banks in comparison to conventional banks. Further, Islamic banks perform better during short-term period while long-term studies show the domination of conventional banks. From policy implication, this study suggests that Islamic banks can perform better than its counterparts in a region that has strong government initiatives and community awareness in Islamic finance.

Purpose: This article investigates the differences in the financial performance of full-fledged Islamic and conventional banks operating in Pakistan. This study also examines the impact of some inter-bank financial factors on the performance of both full-fledged Islamic and conventional banks. Design and Methodology: Annual financial data of 7 banks including (4 full-fledged Islamic and 3 conventional) were extracted from the state bank of Pakistan from 2006 to 2019. To investigate the performance differences between Islamic and conventional banks this study adopts Ordinary Least Square methods. Findings: Results of the study show that ROA for both types of banks is not indifferent to each other. However, the ROE of Islamic banks outperforms conventional banks in Pakistan. The results of the inter-bank factors indicate that LDR has a significant and negative impact on the performance of conventional banks, whereas positive in the case of Islamic banks. The result of the number of employees and branches suggests that opening new branches and recruiting new employees will positively affect the performance of Islamic banks in Pakistan. Implications: These results are beneficial for policymakers of both full-fledged Islamic and conventional banks and the investors of the country. Keywords: Islamic banking, Conventional banking, Profitability, Pakistan

Corporate social responsibility and financial performance in Islamic banks