The impact of corporate governance on bank risk-taking: evidence from an emerging market

PurposeThis study aims to examine diversity in the composition of Shariah supervisory boards (SSBs) of Islamic banks (IBs). It investigates diversity from two perspectives: existing composition of SSBs and the regulatory frameworks and standards of selected Organisation of Islamic Cooperation countries. Diversity characteristics include education, nationality, gender and age.Design/methodology/approachA list of all full-fledged Islamic commercial banks (FFICBs) globally has been carefully prepared and confirmed. Conventional banks with Islamic windows, non-commercial banks, takaful companies and other Islamic financial institutions are excluded. The available profiles of 428 SSB members have been scrutinised and analysed. These board members occupy 522 SSB positions in 238 FFICBs operating in 52 countries around the globe. From the regulatory perspective, 12 national and international Shariah governance frameworks and standards have been examined.FindingsFindings of this paper indicate various levels of diversity in SSBs of the reviewed IBs. The level of diversity in educational background and in the nationality of SSBs can be described as generally acceptable. However, a lack of diversity in gender and age among SSB members is evidently observed in IBs. While the lack of age diversity in SSBs may be relatively justified as a common trend in the composition of corporate boards, SSBs of IBs are seriously lagging behind in gender diversity. On the regulatory level, this study concluded that provisions on diversity as a requirement in SSBs are almost non-existent in the existing regulatory frameworks and standards.Research limitations/implicationsThe major limitation of this study is the lack of available information on the SSB members.Practical implicationsThis paper provides insights for IBs and policymakers concerned with the corporate governance of IBs and all Islamic financial institutions. First, it offers an excellent bird’s-eye view of the status of diversity in SSBs of IBs. Second, it motivates policymakers and standard-setting bodies to ensure, through the relevant regulatory frameworks, adequate levels of diversity in the composition of SSBs. Diversity in SSBs of IBs and Islamic financial institutions should be given special emphasis, not only in boards and top management positions but also in the workplace. This is of profound significance to the reputation of Islamic finance industry which has been recently under mounting pressure to translate the rhetoric about the Islamic finance industry being ethical, fair, just, equitable and inclusive into genuine implementations.Originality/valueTo the best of the authors’ knowledge, this study is the first of its kind to examine the diversity of SSB members from the regulatory as well as from the implementation perspective.

The concept of Islamic finance was considered as a wishful dream almost three decades ago. Today, more than 300 Islamic financial institutions are operating around the globe. By 2020, Islamic finance assets are estimated to reach $3.2 trillion in value. Their clientele are not confined to citizens of Muslim countries only, but are spread over Europe, the United States of America and the Far East. Muslims now have the opportunity to invest their financial resources in accordance with the ethics and philosophy of Islam. At the same time, Islamic finance offers an alternative for the customers of conventional finance. The first thorough studies devoted to the establishment of Islamic financial institutions (referred to hereafter as ‘Islamic Banks’) appeared in the 1940s. Although Muslim owned banks were established as early as in the 1920s and 1930s, they adopted similar practices to conventional banks. In the 1940s and 1950s, several experiments with small Islamic Banks were undertaken in Malaysia and Pakistan. The first great success was the establishment of an Islamic Bank in the Egyptian village of Mit Ghamr, in 1963. Other successes include the establishment of the Inter-Governmental Islamic Development Bank in Jeddah in 1975 and a number of Islamic Banks, such as the Dubai Islamic Bank, the Kuwait Finance House and the Bahrain Islamic Bank in the 1970s and 1980s. In South East Asia, Malaysia became the first country that introduced Islamic finance with the establishment of Bank Islam Malaysia Bhd. in 1983. Commercial banks have also realized the potential of this new field, and a number of major worldwide institutions have adopted Islamic banking and finance as a significant mechanism for diversified growth.

This study examines the impact of murabahah contracts on profitability in the Islamic banking sector in Indonesia, especially in Islamic Commercial Banks. In this study, Return on Assets is used as the main indicator to measure the level of bank profitability. Multiple linear regression is used to empirically test the relationship between murabahah financing and Return on Assets. The results of the study indicate that murabahah financing has a significant and positive effect on Return on Assets. This indicates that the higher the level of murabahah financing disbursed, the greater the increase in profitability of Islamic Commercial Banks. This finding strengthens the evidence in previous literature regarding the importance of the role of Islamic financing product strategies in improving the results of Islamic banking financial institutions. As a result, this study emphasizes the importance of optimizing financing strategies based on murabahah contracts as a major component in the product portfolio of Islamic Commercial Banks. Therefore, to improve competitiveness, efficiency, and create sustainable financial stability in the national Islamic banking system, it is necessary to develop and implement more effective and efficient murabahah contracts by all Islamic banking institutions in Indonesia and work well by all Islamic banking institutions in Indonesia.

The study aimed to identify the extent of the importance of the Governance Committee and its independence in Islamic financial and banking institutions and the Fatwa and Sharia Supervision Board and their integration in limiting non-compliant earnings with Islamic Sharia. This study gains its importance from the importance of the topic it deals with and the important implications it carries in limiting earnings that are not compatible with Islamic law and the future of Islamic banks in maximizing halal earnings and ending unlawful earnings through the Governance Committee and the Fatwa and Sharia Supervision Board and their integration in limiting earnings that are not compatible with Sharia And because it is one of the rare studies that dealt with the relationship of the independence of the Governance Committee and the involvement of the Fatwa and Sharia Supervisory Board to limit the profit that is not compatible with Islamic Sharia in Islamic banks. In order to achieve the desired goals of our study, a methodology based on an analysis of the direct credit financing returns in the Arab Islamic Bank was relied upon, and the returns that are not compatible with Islamic law from direct credit financing, comparing that revenue that resulted from direct credit financing with the revenues that are not compatible with Islamic law that resultedFor direct creditfinancing (vertical analysis) based onthe actual figures as stated in the financial statements of the Arab Islamic Bank The study also relied on an electronic questionnaire that was designed to suit the objectives and hypotheses of the study and was distributed to a sample of the study complex, where the study population (685 Arab Islamic Bank employees) and the total number of questionnaires received from employees reached 71 questionnaires, and the results were analyzed using the SPSS statistical analysis program. This study concluded with several results, the most important of which are: - There is a statistically significant effect of the existence of the Governance Committee on the reduction of non-sharia-compliant earnings in Islamic banks at the level of (α ≤ 0.05). - There is a statistically significant effect of the presence of the Fatwa and Sharia Supervisory Authority on the reduction of non-Sharia-compliant earnings in Islamic banks at the level of (α ≤ 0.05). - There is a statistically significant relationship between the Governance Committee and the Supervision and Fatwa Authority in Islamic banks to limit gains that are not compatible with Islamic Sharia. In order to reduce the profit incompatible with Islamic law in the financial and banking institutions, the researcher recommended the interest of Palestinian institutions and companies in applying governance on an expanded scale, as well as allocating an independent committee for governance, and not being satisfied with the presence of a governance committee integrated with other committees.And directing financial institutions to establish a Sharia Supervisory Authority that would have direct links with the Governance Committee. The researcher also recommended the support of the researchers to delve deeper into the study of governance as a legal oversight body and their impact on financial institutions and their results.It also encourages investmentin Islamic financial institutions because of their consolidation of the principles of Islamic financial law in halal earning. Universities and educational institutions design a master's program concerned with the study of Islamic governance.And providing government supportto Islamic banking and financial institutions by reducing taxes or fees, taking into account their expenses in accordance with Islamic Sharia and the controls of Sharia laws governing banking work. It also provides awareness programs for citizens about governance, its nature and benefits. And the government carrying out comprehensive programs to consolidate governance as a comprehensive way of life. In conclusion, Islamic banks and Islamic banking institutions carry out publication campaigns about their Islamic work system, the aspects of disbursing profits that are not compatible with Islamic Sharia, and the legal control methods used to limit the gain that is not compatible with Islamic Sharia

PurposeThis paper aims to empirically assess the impact of gender diversity and board of directors’ size on Islamic banks’ performance.Design/methodology/approachHand-collected data set including 27 banks from 2005 to 2013 is used to investigate the effect of the above mechanisms on banks’ performance as measured by return on equities and return on assets. The study uses pooling regression, which requires estimating a single equation on different cross-sectional data. Specifically, ordinary least squares is used to estimate the model.FindingsObtained results suggest that the presence of women on the board of directors does not have a significant influence on banks’ performance. However, gender diversity in the management department is found to have a negative and significant impact. Besides, the findings prove that the board of directors’ size adversely affects banks’ performance.Research limitations/implicationsFindings of this study will enhance a better understanding of the interrelationships between performance measures and determinants, which can improve estimations of key inputs in the decision-making process. Such deeper understanding should provide policy and decision makers with an important part of the framework needed to provide quality outcomes. In addition, the results of this study provide some beneficial insights on performance determinants to the policymakers, industry leaders and bank managers. Accordingly, those parties could enhance the profitability of Sudanese Islamic banks by improving capitalisation and assets utilisation and by improving banks operation efficiency, leverage and by reducing the size of the board of directors. Industry leaders and bank managers could also benefit from the findings on bank age, which suggest that they can learn from the experience of newly established banks, as the latter are shown to be able to use their resources to generate more profits.Practical implicationsResults suggest that in the future, Islamic banks should focus on how to weaken the negative performance effect of female executives’ participation. Besides, banks should work to decrease labour market discrimination and increase long-term career commitment amongst women.Originality/valueAfter reviewing the literature, the research objective was not accounted for by the existing empirical works. Indeed, the role of gender diversity and board of directors’ size on a bank’s performance was not examined in the case of Sudanese Islamic banks.

The literature on corporate governance at corporations and conventional banks is extensive; however, it does not assign proper weight to Islamic finance institutions despite their growing importance in the global financial system. Important questions that are still unexplored to date include: What are the attributes of the corporate governance mechanisms at Islamic finance institutions? and How do their corporate governance attributes affect their performance and risk taking behavior? To answer these questions, we use an exhaustive sample of Islamic and non-Islamic banks in the Gulf Cooperation Council (GCC) region, in the years 2007 to 2009, i.e., around the global financial crisis of 2008 which represents a natural stress test. We assess the impact of the corporate governance characteristics ownership structure / concentration, board of directors' size, composition, and independence and the effectiveness of the legal system and investor protection of the country on a wide array of bank performance indicators, including profitability, efficiency, asset quality, and risk. We perform univariate and multivariate tests which control for many potentially confounding effects. Our results show that, during the 2008 global financial crisis, the return on assets and operating income-to-total assets were significantly higher at Islamic banks compared to non-Islamic banks in the GCC region by more than 1 and 2.5 percent, respectively. Islamic banks also exhibited a more prudent risk-management behavior and higher solvency than non-Islamic banks. Moreover, consistent with the notion of the importance of corporate governance, asset-productivity at Islamic banks is significantly increasing in family- and foreign-ownership and the effectiveness of the legal system and investor protection, and it is decreasing in board size and insiders. Furthermore, risk-taking behavior at Islamic banks is decreasing in government- and family-ownership and the investor-protection level in the home country. This study has important practical implications. Investors may consider including Islamic banks in their portfolios given their resilience to the financial crisis. Non-Islamic financial institutions may consider adopting some of the features of Islamic banking into their operating models. Policy makers can use our results for better policy formulation and regulation of their financial system.

PurposeThe purpose of this paper is to examine the influence of gender diversity among the board of directors (BOD) and Shariah supervisory board (SSB) members on the financial performance of Islamic banks in Indonesia and Malaysia.Design/methodology/approachData for a sample of 19 Islamic banks for the period 2010–2018 were collected to test the research hypotheses using pooled ordinary least squares estimation method. Generalized least squares estimation method was used to confirm that the results are robust. This study lagged the explanatory variables by one period to control for potential endogeneity.FindingsThe findings suggest that Islamic banks with more gender-diverse BOD and SSB are expected to have better financial performance. In addition, this paper finds that an increase in Islamic banks’ size may undermine the positive impact of gender diversity among SSB members on Islamic banks’ financial performance.Research limitations/implicationsThis study was conducted only on Islamic banks in Indonesia and Malaysia owing to data constraints; thus, the results may not be generalizable to Islamic banks in other countries.Practical implicationsImproving financial performance is crucial for banks, especially for Islamic banks, to sustain their fast-growing share globally. Therefore, the findings of this study are expected to provide insight and understanding in the selection and appointment of BOD and SSB members at Islamic banks.Social implicationsBy having women represented in the BOD and SSB, Islamic banks will benefit equally from valuable abilities across demographic groups in the society. Furthermore, if the members of the BOD and SSB are properly selected, Islamic banks with more gender-diverse boards can effectively contribute to enhancing social welfare of various segments in the society.Originality/valueThis is the first study, as far as is known to the authors, that provides empirical evidence on the influence of gender diversity among BOD and SSB members on the financial performance of Islamic banks. This paper is expected to be used as a reference by the shareholders and customers of Islamic banks in ensuring that the BOD and SSB have the best optimal composition that maximizes their profits.

Purpose The purpose of this study is to assess and contrast the impact of various factors, including both bank-specific and macroeconomic factors, on the financial performance of Islamic and conventional banks (I&CB) in countries with a dual banking system. Design/methodology/approach A general least square model is applied to a large data set of 103 I&CB operating in the Middle East and North Africa (MENA) region, comprising unbalanced annual panel data spanning the period from 2015 to 2020. The financial performance index (FPI) derived from capital adequacy, asset quality, management efficiency, earnings, and liquidity (CAMEL) ratios is used as the dependent variable. Findings Key factors, such as overhead expenses, gross domestic product (GDP) and retained earnings, exert a substantial influence on the financial performance of both I&CB. Moreover, the findings suggest that certain parameters, including deposits, inflation and cellular banking usage, significantly impact on the financial performance of conventional banks, while bank size specifically affects the financial performance of Islamic banks. Research limitations/implications While this study provides valuable insights, it is essential to acknowledge its limitations. The research focuses on a specific region (MENA) and may not be universally applicable to other geographical areas or banking systems. The study’s findings are based on historical data and might not fully reflect current or future market conditions. Additionally, the choice of variables and methodology may introduce bias or limitations, as with any empirical study. The theoretical implications of the research paper lie in the distinct ethical principles that constitute the foundation of Islamic finance. The ethical opposition to Riba is poised to have extensive implications, influencing market stability, commercial and economic impact and contributing to responsible banking practices within the Islamic banking sector. The study suggests that adherence to these sacred principles not only aligns with ethical considerations but also fosters social responsibility within Islamic banking institutions. This holds significance for broader societal and economic impacts, as responsible banking practices contribute to sustainable and equitable economic development. Practical implications The study underscores the significance of efficient overhead cost management for conventional banks, particularly in the context of a rapidly evolving digital banking environment. The call for adaptation and innovation in operational strategies aligns with the broader principles of efficiency and effectiveness emphasized in Islamic finance. Social implications In essence, the theoretical and practical implications of the study surpass the narrow focus on financial performance, resonating with the broader societal and economic landscape within the Islamic banking sector. The integration of ethical principles not only reinforces the unique identity of Islamic finance but also positions it as a model for responsible and sustainable banking practices in the MENA region and beyond. Originality/value CAMEL ratios are used to build an FPI to evaluate bank performance, providing a more precise and comprehensive assessment compared to traditional return ratios like return on assets or return on equity. Second, the authors conduct a thorough analysis covering factors across bank-specific, financial and macroeconomic dimensions. Thus, the study stands out by not only examining bank-specific factors but also by considering external factors such as GDP, interest rates and the development of the financial sector. The focus on the MENA region allows us to offer generalizable findings, highlighting distinctions between I&CB and considering a period with boom years (2015–2019) and a recession year (2020).

Islamic banking and finance industry is a speedily and widely-ranging growing sector globally since its structured business initiation in the late 20th century AD. It is actual fact that Islamic and non Islamic nations are seriously concerning their curiosity to implement this potential banking and finance system in their countries and states presently as a result of negative impacts of burdensome interest system on their economics. At the same time, Islamic banking industry started its functions few decades ago among the influence of well established conventional banking and finance sector in Sri Lanka and it is developing gradually among the Muslims and other community people. However, it is notable that in Sri Lanka where Muslims are living minority level, the Islamic banking and financial institutions have to confront a number of challenges in their daily functions and the development as well. Consequently, the main objective of this study is to clarify the major Challenges faced by Islamic financial institutions in Sri Lanka. Accordingly, the study is designed as qualitative method and personal direct interview with semi structured questionnaire is used in data collection. The questionnaire for interview is dealt with selected important matters relating to the particular study. Furthermore, the secondary data required is also collected and utilized from related literatures and sources. Descriptive statistic analytical techniques are used in data analyzing to carry out the study effectively. In this context, the findings reveal that there are many negative impacts faced by Islamic banking and financial institutions in Sri Lanka in the operations of offering Shariah compliant products and services by means of the major challenges. Consequently, it is much important to find proper solutions to overcome these challenges and in the development of the sector. KEY WORDS: Islamic Financial Institutions, Challenges, Shariah compliant, Sri Lanka, Finance Products and Financial Services

Purpose– The purpose of this paper is to examine the relationship between board structure (consisting of board size, board composition, CEO role duality and chairman composition), investment account holders (IAHs) and social contribution and the bank performance in one of the fastest-growing industries, Islamic banking.Design/methodology/approach– A generalized least square (GLS) regression model was used to investigate such relationship applying data from a sample of 40 Islamic banks operating in Gulf Cooperation Council (GCC) countries over the period of 2008 until 2011.Findings– The results show that both size and composition of the board have a negative effect on bank performance. On the other hand, the separation of CEO and chairman roles and the IAHs have no effect, while the chairman independence has a positive impact. As for the control variables, bank size positively influences bank performance whereas leverage has a negative effect. Zakah and gross domestic product produce no significant effect on bank performance.Research limitations/implications– Even though the model has explained the significant part of the variation in performance, there are other factors considered as noise in the model which are unexplained due to the lack of data. As such, other mechanisms of corporate governance (CG) comprising attributes of the remuneration and nominating committees and ownership structure may be used in future research. The sample size is also limited; thus, in future research, the sample size could be increased by including Islamic banks operating in all Middle East countries.Practical implications– The results suggest that to yield a better bank performance, Islamic banks should enhance the effectiveness of CG through the board of directors (BODs), whereby any decisions made by the BODs would lead to greater investors’ confidence in the market. The results suggest that policymakers should impose new mechanisms that could impact the effectiveness and compliance of BODs on the code of CG and guidelines of micro-finance, in general, and among Islamic banks, in particular. The community also has the right to know up to what extent are the Islamic banks are in compliance withShariahprinciples and rules and the impact of their transactions on the society’s welfare.Originality/value– BODs’ failures are the primary reason for the recent financial collapses, and Islamic banks are not spared from these events. Even though many studies have examined the influence of BODs effectiveness on the performance of conventional banking industry over time, studies on the Islamic financial institutions are quite scarce. In addition, the results obtained by the studies on conventional banks may not be applicable to Islamic banks. This is because the BODs of Islamic banks discharge their responsibilities and duties along with the existence of the Shariah supervisory board (a multi-layer structure), which is quite different from the CG structure in conventional banks that is dependent on the BODs (a single-layer). Therefore, this research attempts to fill the gap in the literature by addressing this issue in the Islamic banking industry by using a stakeholder theory based on Islamic perspective which has not been used yet in previous studies.

Purpose The purpose of this study is to analyse the impact of Islamic banking and conventional banking on Pakistan’s economic growth and to determine which sector exhibits greater resilience in the context of the COVID-19 pandemic. Design/methodology/approach This study uses time series data spanning the period from 2017 to 2022, divided into pre-COVID-19 and during-COVID-19 phases. The data is analysed using the Autoregressive Distributed Lag (ARDL) model. Economic growth, represented by real GDP, serves as the dependent variable, while the independent variables encompass the development of both Islamic and conventional banking sectors. Findings The findings reveal that before the onset of the crisis, both Islamic and conventional banking sectors played a significant role in driving economic growth. However, during the pandemic, the Islamic banking sector demonstrated greater support for economic development. Research limitations/implications This study emphasises the importance of policymakers and regulators prioritising the growth of the Islamic banking sector as a strategic measure to enhance economic resilience and promote sustainable development. Practical implications The findings underscore the practical implication of leveraging Islamic banking as a strategic tool to promote economic growth, enhance crisis management and ensure economic stability, especially during global disruptions such as pandemics. Originality/value This study introduces a novel perspective by conducting a comparative analysis of Islamic and conventional banking and their impact on economic growth in the context of COVID-19 in Pakistan, by identifying the sector that exhibits greater resilience during the crisis.

This study examines the impact of the Sharia Supervisory Board's size (SSB) and the Board of Directors on the financial performance of Islamic commercial banks in Indonesia, focusing on a decade-long period from 2011 to 2020. The research adopts a quantitative approach, analyzing secondary data from the Good Corporate Governance (GCG) reports of ten selected Sharia Commercial Banks (BUS). Advanced panel data analysis techniques, including regression model estimation, model selection, assumption testing, and hypothesis testing, are utilized to ensure a robust examination. The analysis reveals multifaceted outcomes. Key financial indicators such as the profit-sharing ratio, zakat performance ratio, and Islamic income ratio show no significant impact on the bank's financial health. However, the Islamic investment ratio positively correlates with financial robustness. The size of the SSB has a negative, albeit insignificant, influence, whereas the Board of Directors' size does not significantly affect financial health. Notably, the study highlights the substantial moderating effects of SSB and the Board of Directors on the relationship between the Islamicity performance index and financial health. This research contributes to the field by showcasing the critical roles of SSB size and the Board of Directors in evaluating the financial health of Islamic commercial banks. It provides practice and theory implications of the factors that drive financial performance, offering valuable insights for policymakers and stakeholders in the Islamic banking sector.

Islamic finance offers an alternative to society through the Islamic banking system, takaful (Islamic insurance), and capital market goods and services. The explosive growth of Islamic banking products has experienced double-digit annual growth since its inception. Islamic Financial Institutions (IFIs) are being pushed to create new products to meet the ever-changing needs of their existing and potential customers as a result of the rising popularity of Islamic banking. However, Islamic banking products still face challenges in Islamic banking institutions across the world. Therefore, the purpose of this study is to examine the Polemic of Debt-based vis-s-vis Equity-based transactions. The methodology that has been utilized in this study is the literature review. This paper aims to highlight Islamic finance methods, particularly debt and equity-based financing discussed the present challenges surrounding debt and equity-based financing. The finding suggests the main factors which hinder the application of musharakah and mudarabah by Islamic finance products, namely high risk, asymmetric information, capital guarantee, lack of awareness, and lack of knowledge of the equity-based products and issues related to debt-based transactions. Finally, this study recommends that Islamic financial institutions, banks, and regulators should fully implement equity-based contracts

Purpose - Since 2020, the COVID-19 pandemic has harmed the Efficiency Islamic banking industry. This study examines the effects of the COVID-19 pandemic on 33 Islamic stock-traded banks in Asia.Method - This study includes public financial statements and stock prices of Islamic banks in Asia. This study compares peer-to-peer of how the Covid-19 pandemic affect 33 Islamic financial institutions in 2019 and 2020. A dummy-covid separated pre-pandemic and post-pandemic periods and bank efficiency was a dependent variable. Least-squares panel data regression, fixed-effects, and random-effects models determine model parameters.Result - This panel regression analysis shows that Islamic banking's usefulness changed after the Covid-19 pandemic. Islamic financial institutions performed better than usual during the pandemic. The analysis results show this clearly.Implication - Islamic banking appears relatively unaffected by the current economic downturn. The Islamic banking sector, which differs from its conventional counterpart in that it is based on the principle of profit sharing, will fare better during economic contractions, according to these findings.Originality - This is the first study to use a cross-country sample of Islamic banks in Asia to analyze the efficiency of Islamic banking during COVID-19.

Purpose This study aims to examine the relationship between the background of the Sharia Supervisory Board and the cost of equity capital. In addition, this study also examines whether the moderating role of cross-membership of the Sharia Supervisory Board affects the relationship. Design/methodology/approach To test the hypothesis, this study uses Islamic banking listed firms on the capital market from 15 countries during 2010–2021 with a total of 214 firm-year observations. To estimate the results, this study applies panel data analysis, robustness check and endogeneity test. Findings The results of this study confirm that the accounting education background of the sharia supervisory board plays an important role in reducing the cost of equity capital, which reflects lower investment risk. In the context of the resource-based view (RBV) theory, the accounting education background of the Sharia Supervisory Board can be considered as one of the unique resources or capabilities possessed by Islamic financial institutions. In addition, according to RBV theory, an organization’s competitive advantage can be obtained through rare, inimitable and valuable resources. In this case, solid accounting education provides better expertise and understanding of risk and financial management, which in turn can increase investor confidence. Research limitations/implications This study offers the new theoretical model in evaluating investment decisions in the Islamic banking sector. In addition, it opens up opportunities for further studies to explore the relationship between education background, cross-institutional membership and financial performance in the Islamic banking sector with different cultural and regulatory contexts. Practical implications By reducing the cost of equity capital through better supervision and managing risk, Islamic banking can increase investor confidence. This is essential to attract the capital needed for growth and expansion of business, as well as to enhance the institution’s reputation in the financial market. Originality/value By identifying cross-membership as a moderating variable influencing the relationship between accounting education and cost of equity capital, this study opens up new insights into the dynamics of interactions between board members.