Organization Of Islamic Cooperation Countries Research Articles

Industrialization Dynamics in Organization of Islamic Cooperation (OIC) Countries: Evidence from the Club Convergence Approach

The primary objective of this study is to scrutinize the industrialization patterns across 36 member states of the Organization of Islamic Cooperation (OIC) spanning from 1990 to 2021, adopting a club convergence approach. This study employed the Competitive Industrial Performance (CIP) index developed by the United Nations Industrial Development Organization. The CIP index serves as a yardstick for assessing countries’ effectiveness in manufacturing and exporting industrial goods, facilitating comparisons of industrial competitiveness across nations. The empirical findings derived from the convergence methodology established by Phillips & Sul (2007, 2009) unveiled the absence of convergence in CIP among OIC countries yet delineate the existence of four distinct convergence clusters. Notably, the CIP scores of countries exerted a significant influence on the formation of these clusters, with member states within the same cluster exhibiting comparable CIP performances. This outcome underscored the persistent dual structure characterizing the OIC panel, wherein nations with lower CIP standings failed to converge toward those with higher performance levels.

Human rights and value of cash: Evidence from Islamic and non-Islamic countries

This study examines whether and how human rights (HR) have bearings on the value of cash. Given the positive effect of HR improvement on corporate governance (CG) and that of CG on cash value, HR should positively affect cash value through CG. Using 23 Organization of Islamic Cooperation countries and 88 other countries during the period 1995–2019 as the sample, this study finds that the value of cash and excess cash is lower in Islamic countries than in other countries. Additionally, HR have a positive effect on cash value, but this effect is weaker for Islamic countries than for other countries. Furthermore, economic development (ED) (rule of law (RL)) reinforces the positive effect of HR on cash value, and this effect is stronger (weaker) for Islamic countries than for other countries. Study results provide important implications. Given the observed striking differences in results between Islamic and other countries, future related research should consider them to improve validity and reliability of empirical results. Multinationals or firms that consider establishing subsidiaries in foreign countries should also consider country-specific factors, like types of countries, HR, ED, and RL, because they may affect the agency and external financing costs. Furthermore, national governments can evaluate the effectiveness of HR promotion by referring to the study results regarding HR's positive effect on cash value such that they can fine tune their HR and economic policy as well as enforcement of RL to better achieve their intended goal of improving HR and CG.

Dynamic leverage policy in Islamic and conventional banks during crises in the OIC countries: a procyclicality and prospect-theory analysis

Purpose The purpose of this study is to investigate and compare the dynamic leverage policies of Islamic and conventional banks within selected Organization of Islamic Cooperation (OIC) countries. The study specifically focuses on the concepts of leverage procyclicality and prospect theory. Design/methodology/approach To achieve the research objectives, the study uses data from three distinct periods: Crisis I (2007–2009), Crisis II (2011–2012) and Crisis III (2020). The analysis uses dynamic panel-data regression, using the generalized method of moments (GMM) technique. Findings The research findings indicate that both Islamic and conventional banks demonstrate leverage procyclicality. Interestingly, Islamic banks exhibit weaker leverage procyclicality during normal conditions but display stronger procyclicality during crises compared to their conventional counterparts. The application of prospect theory reveals that both bank types exhibit risk-taking or risk-averse behavior through leverage under certain financial and market performance measures as the first-level domain of the gain-vs-loss condition. Furthermore, during crises (as the second-level domain of the normal-vs-crisis condition), both Islamic and conventional banks experience heightened leverage. Notably, Islamic banks, owing to their lower risk exposure and greater shock resilience, demonstrate lesser risk-taking behavior through leverage than conventional banks, both during periods of underperformance and worsening conditions amid crises. These findings validate the extension of prospect theory's applicability in a two-level domain perspective. The dynamic nature of leverage policy, being procyclical and adhering to prospect theory, also varies following different crises specifically. Research limitations/implications The study's limitations include the unequal crisis periods (Crises I, II and III), leading to an imbalanced examination of their effects, certain financial and market performance metrics that fail to corroborate the expected hypotheses and the limited generalizability of findings beyond the selected OIC countries. Practical implications Understanding the intricate dynamics and behavioral aspects of leverage policy for both Islamic and conventional banks, particularly during crisis scenarios, proves crucial for reviewing banking regulations, making informed financial decisions and managing risks effectively. Originality/value This study enriches the current knowledge by presenting two key points. First, it highlights the dynamic nature of leverage procyclicality in Islamic banks, showing a change from weaker procyclicality in normal conditions to stronger procyclicality during crises compared to conventional banks. Second, it expands the application of prospect theory by introducing a dual-level domain context. Examining the comparative leverage policies of Islamic and conventional banks during different crises within OIC countries provides novel insights into leverage procyclicality and behavioral responses.

Training of Imams, Murshidat and Muslim Religious Leaders: Experiences and Open Questions—An Overview of Italy

Muslims in Italy are an increasingly large and relevant part of the social fabric, although their social condition is still characterized by a “precarious” status. This is explained by a relationship with State institutions that is not yet fully defined in formal terms and by resistance to legitimizing their presence in the public space. In addition, international events have led to the spread of a securitarian political rhetoric and to the intensification of “control” devices on the organized forms and public manifestations of Muslim religiosity. One issue that has concerned political interlocutors has been the training of “imams”. This paper presents the Italian case of training “on” and “of” Islam, analyzing it as a contested field, albeit in a not open and hostile form, between the different social and institutional actors, that is Italian universities, Islamic organizations and transnational Islam and Islam “of the States”. It then analyzes the approach that has been developed and experimented by an Italian State university for the training of imams and murshidat, in collaboration with Italian Islamic organizations and some universities in the Organization of Islamic Cooperation countries, and it also discusses how it fits in as a possible innovative model among the various “assemblages” that have emerged in Europe in recent years.

Gravity model of trade approach: what drives Indonesia’s seafood export and its halal market potency in OIC (Organization of Islamic Cooperation) countries

PurposeThis study aims to unveil the variables that drive Indonesia’s seafood exports to organization of Islamic cooperation (OIC) countries, including a deeper analysis to understand the factors that affect Indonesia’s potential for halal seafood exports, and attempts to validate Linder’s hypothesis, which might occur as part of the determinants of Indonesia’s seafood exports, as well as one of the variables that can affect Indonesia’s potency of halal seafood exports based on economic scale similarities and relative factor endowments.Design/methodology/approachUsing Poisson regression by pseudo maximum likelihood, this study applies the theory of trade gravity and Linder’s hypothesis of Indonesia’s seafood exports to OIC countries and its halal market potency over the 30 years observation period from 1992 to 2021, with 47 countries importing Indonesia’s seafood products during the observation period based on United Nations Comtrade statistics.FindingsThe variables that drive Indonesia’s seafood exports are the situation of the economy between Indonesia and its trading partners, the population of importing countries and the common understanding of language. On the other hand, the adjusted-Muslim GDP of importing countries, the adjusted-Muslim GDP of Indonesia and the number of Muslim inhabitants of importer countries are the factors that affect Indonesia’s potential for halal seafood exports. The study also validates the presence of Linder’s hypothesis in Indonesia’s seafood export and could hint Indonesia’s potential for halal seafood exportsResearch limitations/implicationsOwing to the absence of an Harmonized System code that explicitly accommodates trade in halal commodities, especially in halal seafood exports, it will be more accurate if data are available in the future as material for further studies. Future studies may also consider per capita consumption of seafood, food safety standards and the level of food security from OIC countries as variables that might also influence Indonesia’s seafood exports in an approach analysis using the gravity theory of trade.Practical implicationsThis study is part of the authors’ efforts to encourage a greater contribution of the fisheries sector to Indonesia’s GDP by identifying the factors that drive seafood exports, which have so far only been around 2%–3% and have never reached more than 4% in the past two decades. While Indonesia is blessed with extraordinary marine biodiversity and hopes of being the leader of the halal food industry, the fisheries sector is expected to contribute.Originality/valueUnlike previous studies that used the approach of the gravity model of trade on food exports, this study is specifically in the field of seafood exports, takes Indonesia as the main object of research and also examines Linder’s hypothesis as part of the analysis to identify what drives Indonesia’s seafood exports in the OIC countries market and fill the scant of studies highlighting the factors that could drive halal food exports, specifically in seafood.

Current Status of Neurorehabilitation Services in the OIC Countries: Results of an International Online Survey

Objectives: Neurorehabilitation services are not widely available to most persons with disability (PWD) in the Organization of Islamic Cooperation countries. This study aimed to document status of neurorehabilitation services in OIC countries. Study Design and Setting: Cross-sectional online survey. Methods: Self-administered online survey conducted using Google Forms. Key resource persons for each OIC country working in field of neurorehabilitation were identified from various databases. The questionnaire was emailed to 20 identified resource persons. The response rate was 60% (12/20). Results: Neurorehabilitation services were available in 9 out of 12 surveyed countries. Only 2 countries reported providing access to neurorehabilitation services to 76-100% of their population. Five countries reported less than 25% of population had access to these services. Most commonly available neurorehabilitation services included services for stroke, spinal cord injury, pediatric neurorehabilitation, brain injury, and neuromuscular rehabilitation. Three countries had none of these specialized services. Five countries had neurorehabilitation training programs for physicians and other rehabilitation professionals. Patients had to pay out of pocket for these services in most of surveyed countries, followed by public funding and private insurance. Tele-neurorehabilitation and local disease-specific neurorehabilitation guidelines were not available in most of surveyed countries. Conclusion: Neurorehabilitation services in OIC region are not widely available, with significant variability in availability and quality. There is a need to develop and improve these services. Sharing knowledge and expertise through various forms, such as exchange visits and online sessions, can help improve neurorehabilitation services in these countries

Financial inclusion and sustainable development of banks: the place of organization of Islamic cooperation (OIC) in emerging markets

PurposeThis study examines the impact of financial inclusion on the corporate sustainability of banks in both Organization of Islamic Cooperation (OIC) and non-OIC emerging economies, considering the COVID-19 pandemic.Design/methodology/approachThe research utilizes data from 3,159 bank-years from 2007 to 2021 across 33 emerging markets.FindingsEmpirical findings indicate that firms operating in higher financial inclusion developing countries tend to exhibit higher levels of sustainable development. This positive relationship has become even more pronounced during the COVID-19 pandemic, suggesting the importance of financial inclusion in fostering corporate sustainability, especially in times of economic challenges. Interestingly, while the positive correlation between financial inclusion and sustainable development remains consistent across both OIC and non-OIC countries, firms in OIC countries do not show significant changes during the pandemic.Practical implicationsThis observation suggests that the pandemic’s impact on corporate sustainability may vary between the two groups of countries. This study highlights the significance of financial inclusion in promoting corporate sustainability in developing economies. In times of recessions when accessing finance becomes expensive, policymakers in OIC countries should identify firms that adhere to Islamic principles, such as those sensitive to interest rates, and provide them with targeted support. This assistance can enable these companies to compete effectively and achieve their financial sustainability objectives.Originality/valueThere has been no attempt to investigate the effect of financial inclusion and the pandemic on the sustainable development of banks in developing countries.

Utilising AI-based Chatbot for Maximising Value and Profitability of Islamic Financial Institutions

global Islamic finance industry has experienced significant growth in recent years, establishing Islamic financial institutions (IFIs) as prominent players in the international financial landscape. To maintain competitiveness and sustainability, IFIs must embrace innovation and explore avenues for maximising their performance. This research aims to investigate the effect of AI-based Chatbots on the value and profitability of IFIs in Organisation of Islamic Cooperation (OIC) countries. The study has employed quantitative methodology, and the data was collected from the Bloomberg database, Thomson Reuters DataStream, World Development Indicators and annual reports of 104 IFIs across 44 OIC countries from 2020 to 2022. Employing the Generalised Method of Moments (GMM), this study investigates the impact of AI-based Chatbots on the value and profitability of IFIs. The findings show a positive impact of Chatbot on Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q (TBQ). Furthermore, the analysis reveals that variables such as Gross Domestic Product (GDP), institutional size (SIZE), and age (AGE) exhibit positive associations with the value and profitability of IFIs. Conversely, the study identifies Consumer Price Index (CPI) as exerting a negative influence on the value and profitability of IFIs, indicating potential challenges posed by inflationary pressures. IFIs may consider investing in the development and deployment of advanced AI technologies to enhance overall profitability. Keywords: AI-based Chatbot; Profitability; Islamic financial institutions (IFIs); OIC Countries; Dynamic GMM

Sustainable Investing and Islamic Finance: Evidence from the Organisation of Islamic Cooperation (OIC) Countries

Sustainable investing and Islamic finance have been two of the fastest-growing areas of finance. In Islamic finance, equity markets play an important role. In the literature on Islamic equities, there are relatively few studies that have integrated sustainability factors into Islamic finance. In this paper, our objective is to contribute to the line of research on the integration of sustainable investing into Islamic finance. To that end, we first examine the comparative performance of investing in the sustainability indices from those Organization of Islamic Cooperation (OIC) countries that are partners of the Sustainable Stock Exchanges (SSE) initiative. We then conduct a case study of Borsa Istanbul in Turkey, which has the best-performing sustainability index from OIC countries. Overall, our findings reveal the heterogeneity in sustainable investment performance, and suggest the potential of obtaining superior risk-adjusted returns in certain economies from OIC countries. This study draws implication on how sustainable investing can help bridge the gap between Islamic and conventional financial markets.

Corruption and Bank Risk‐Taking in Dual Banking Systems

ABSTRACTResearch Question/IssueWe investigate whether the risk‐taking of Islamic banks is affected differently by corruption compared to conventional banks. We also examine whether the characteristics of the Shari'ah Supervisory Board (SSB) of Islamic banks and the characteristics of the board of directors of conventional banks play an effective role in moderating such an effect.Research Findings/InsightsWe find consistent evidence that banks in countries with higher corruption have higher bank risk for both conventional and Islamic banks. However, this association is attenuated by the size of the SSB, the presence of female board members, and higher academic qualifications of SSB members. For conventional banks, the moderating effect of the presence of female directors and academically qualified members on the board of directors is also prevalent but to a lesser extent.Theoretical/Academic ImplicationsThis study contributes to the corporate finance literature more generally by highlighting the role played by corporate governance, particularly the presence of female members and academically qualified members on the SSBs of Islamic banks and on the board of directors of conventional banks, in mitigating the effect of corruption on bank risk‐taking for the two bank types.Practitioner/Policy ImplicationsOur findings are based on a matched sample of banks operating in 10 OIC (Organization of Islamic Cooperation) countries and have important implications for bank stability and bank governance reforms. On the detrimental side, urgency of the anti‐corruption campaigns in these countries is justified due to the significant effect of corruption on risk‐taking for both conventional and Islamic banks. Overall, to better fight corruption in countries with dual banking systems, there is a need to enforce stricter rules for all types of banks.

Bank Credit and Economic Growth: Evidence from OIC Countries

This study aims to explore the impact of bank credit along with three other independent variables, namely population, employment, and inflation, on economic growth in 55 Organization of Islamic Cooperation (OIC) member countries. The data used is annual panel data from 2010 to 2021, obtained from SESRIC OIC. The analysis method applied in this study is static panel data regression. The results show that each independent variable, such as population, employment, inflation, and total bank credit, has a significant effect both simultaneously and partially on the economic growth variable (GDP). Bank credit facilitates the efficient allocation of resources from savers to borrowers who have productive investment opportunities, thereby promoting economic growth. Second, banks act as an important channel in the transmission of monetary policy by providing financial intermediation, receiving and utilizing large amounts of public funds, and creating money supply. Third, bank credit expansion is associated with higher economic growth across industries, encouraging tangible investment but not intangible investment in more debt-dependent industries.

Qualitative perspectives of middle and high skilled workers on humanitarian crowdfunding for poverty reduction in selected organization of Islamic cooperation

Crowd humanitarian fund, otherwise termed as mutual fund, has overwhelmingly been discussed by many scholars and researchers in western countries. There is obscurity in existing literature in Islamic countries with respect to the interconnectedness between various Islamic financial concepts within the Islamic legal framework and the conceptualization of crowd humanitarian funds. The primary objective of this paper is to address this obscurity by investigating the perspectives of middle- and high-skilled workers among members of the Organization of Islamic Cooperation (OIC) with respect to the crowd humanitarian fund. Hence, the central research question (CRQ) was formulated as follows: How do the middle and high-skilled workers perceive the generation of crowd-humanitarian funds for the purpose of helping the less privileged citizens in Organization of Islamic Cooperation (OIC) countries? The qualitative method was used as the methodology of the study. In order to collect data for the study, an open-ended interview was employed, and a total of 22 participants were interviewed. Three major themes were generated from the interview, namely: An overview of crowd humanitarian funds, categories of less privileged people in OIC countries, and the use of humanitarian funds for poverty reduction. The findings indicated that the traditional method of collecting funds from crowds is to assist with any humanitarian issue is still applicable in many Muslim countries. In addition, the unity in contributing to the humanitarian fund from the crowd, that is, common practice in Muslims’ culture is what Western society terms as crowdfunding. It is further revealed that there are different categories of people, such as the poor, the needy, and people with low incomes, who can benefit from crowdfunding, especially by using it for investment purposes. In addition, crowdfunding is considered an essential monetary relief to less fortunate individuals or communities in order to have a sustainable life. It can also be used for provision of social amenities such as food, shelters, clothes, hospitals, schools, and job opportunities.

Does Renewable Energy Consumption a Driver for Economic Growth? Panel Data Analysis in Selected OIC Countries

This paper aims to examine the relationship between energy consumption from renewable energy sources, and economic growth expressed in GDP per capita in several OIC countries. The dataset used involves data from OIC (Organization of Islamic Cooperation) countries including Indonesia, Iran, Turkey, Saudi Arabia, Nigeria, Egypt, UAE, Malaysia, Bangladesh, and Pakistan for the period 2000 to 2018 obtained from the World Development Index. This study uses a dynamic panel estimation approach such as DOLS and FMOLS to determine the long-term relationship between variables. We also discuss how to use the panel Granger-causality test to estimate causality in the short term. The empirical result shows that in the long-run, renewable energy consumption doesn't have an effect on economic growth. Meanwhile, CO2 emissions were found to have a significant positive relationship with economic growth. Furthermore, the conservation hypothesis theory is accepted between economic growth and consumption of renewable energy. Thus, the implementation of conservation policies can be applied by taking into account economic growth.

Comparative Analysis of Sustainable Food Governance and the Alignment of Food Security Policies to Sustainable Development: A Case Study of OIC Countries

Employing Grey Relation Analysis (GRA) and Leximetrics, this study conducts a comparative analysis of sustainable food governance performance in the Organization of Islamic Cooperation countries (OIC). It assesses the alignment of their food security policies with sustainable development principles. Addressing a gap in the existing literature, the study aims to assess two separate components of food security governance, i.e., policy formulation and policy implementation. This is achieved by focusing on critical intrinsic factors like sustainable agriculture, sufficiency, resilience, and inclusivity, and sustainable finance which are often overlooked in policy formulation and evaluation. The findings reveal inadequate incorporation of sustainable finance, sustainable agriculture, circular food systems, and effective governance principles. Several countries lack concise policies (e.g., Iran, Turkmenistan, Suriname), relying on fragmented approaches, while others adopt regional food security strategies with observed differences in food governance versus policy alignment performance. The study enhances our understanding of food security governance and policy formulation and implementation, offering insights for advancing sustainability in the food security policies of the OIC.

Macroeconomics, human development and political stability: evidence from OIC countries

This study aims to examine and analyze the effect of macroeconomic variables on the Human Development Index (HDI) in the Organisation of Islamic Cooperation (OIC) countries with political stability as the moderating variable. The GMM (Generalized Method Moment) dynamic panel and the MRA (Moderated Regression Analysis) will be used for determining the type of moderation needed as analysis techniques. In the first section, the findings state that inflation and unemployment have no effect on HDI, This is due to the fact that inflation and unemployment are very dependent on global economic fluctuation. Meanwhile, trade openness has a significant positive effect on HDI and foreign direct investment has a significant negative effect on HDI. This can add to the evidence that a high level of trade openness can support HDI values in OIC countries. Trade Openness can strengthen the economy, education, and health simultaneously by increasing prosperity through increased demand, supply, and services in numerous sectors. Secondly, the value of the moderator variable (political stability) on the relationship between unemployment and HDI demonstrates that political stability acts as a "Quasi Moderator" which means that political instability can exacerbate the negative influence of unemployment on HDI in OIC countries. This research has implications for the importance of cooperation between OIC countries in various fields, especially in increasing trade, investment, job creation and good governance to support the expansion of human development in OIC nations and to build sustainable prosperity.

Examining the efficiency of stock markets using multifractal detrended fluctuation analysis. Empirical evidence from OIC (Organization of Islamic Cooperation) countries during the GFC and COVID-19 pandemic

PurposeThis study aimed to examine the efficient market hypothesis (EMH) for the stock markets of 12 member countries of the Organization of Islamic Cooperation (OIC), such as Egypt, Indonesia, Jordan, Kuwait, Malaysia, Morocco, Pakistan, Saudi Arabia, Tunisia, Turkey and the United Arab Emirates (UAE), during the global financial crisis (GFC) and the COVID-19 (CV-19) epidemic. The objective was to classify the effects on individual indices.Design/methodology/approachThe study employed the multifractal detrended fluctuation analysis (MF-DFA) on daily returns. After calculation and analysis, the data were then divided into two significant events: the GFC and the CV-19 pandemic. Additionally, the market deficiency measure (MDM) was utilized to assess and rank market efficiency.FindingsThe findings indicate that the average returns series exhibited persistent and non-persistent patterns during the GFC and the CV-19 pandemic, respectively. The study employed MF-DFA to analyze the sequence of normal returns. The results suggest that the average returns series displayed persistent and non-persistent patterns during the GFC and the CV-19 pandemic, respectively. Furthermore, all markets demonstrated efficiency during the two crisis periods, with Turkey and Tunisia exhibiting the highest and deepest levels of efficiency, respectively. The multifractal properties were influenced by long-range correlations and fat-tailed distributions, with the latter being the primary contributor. Moreover, the impact of the fat-tailed distribution on multifractality was found to be more pronounced for indices with lower market efficiency. In conclusion, this study categorizes indices with low market efficiency during both crisis periods, which subsequently affect the distribution of assets among shareholders in the stock markets of OIC member countries.Practical implicationsMultifractal patterns, especially the long memory property observed in stock markets, can assist investors in formulating profitable investment strategies. Additionally, this study will contribute to a better understanding of market trends during similar events should they occur in the future.Originality/valueThis research marks the initial effort to assess the impact of the GFC and the CV19 pandemic on the efficiency of stock markets in OIC countries. This undertaking is of paramount importance due to the potential destabilizing and harmful effects of these events on global financial markets and societal well-being. Furthermore, to the best of the authors’ knowledge, this study represents the first investigation utilizing the MFDFA method to analyze the primary stock markets of OIC countries, encompassing both the GFC and CV19 crises.

The OIC's Intra-Bloc and Extra-Bloc Trade: How Effective are the FTAs?

The present study evaluates the role of Free Trade Agreements (FTAs) in facilitating trade for the Organization of Islamic Cooperation (OIC) member countries. We used the structural gravity model and the Poisson pseudo-maximum likelihood estimator to examine annual bilateral trade from 2000 to 2019. We find that FTAs have a positive impact, which is more pronounced in the case of the intra-OIC trade. Furthermore, the findings show that the quality of governance in the source country influences the adjustment of the exporting process in response to the entry of an FTA. The majority of OIC countries currently have poor governance. Therefore, improving the governance conditions would encourage trade, particularly for the extra-bloc exports.

Long-Term Impact of Inflation and Macroeconomic Variables on Foreign Exchange Reserves in the Organization of Islamic Corporation

This study examines the long-term influence of inflation variables, Gross Domestic Product (GDP), exports, imports, and remittance receipts in 7 countries of the Organization of Islamic Cooperation (OIC). This research is expected to contribute to OIC countries related to increasing foreign exchange reserves through inflation control, increasing export diversification, decreasing imports, and increasing remittances while still paying attention to people working abroad. Thus, it can improve the economic level of the OIC country and support international peace and security and protect the holy places of Muslims.

Unlocking Economic Potential: Leveraging Maqâshid al-Syarî'ah Achievements to Boost Investment in OIC Countries

The study investigates the factors influencing investment ratings within OIC (Organization of Islamic Cooperation) countries from 2011 to 2015. We employed the Tobit Regression model as our primary analytical tool to achieve this objective. Our data sources encompassed secondary data sets published by reputable organizations such as the World Bank, Transparency International, and UNDP. We utilised purposive sampling, targeting 19 OIC nations for which comprehensive data on the required variables were available. The model featured five independent variables: the Corruption Perception Index, GDP per capita, population growth, life expectancy, and the education index. The sole dependent variable under examination was the investment rating. Our findings unveiled that the Corruption Perception Index and GDP per capita significantly influenced the investment ratings within OIC countries. It implies that perceptions of corruption and economic prosperity played pivotal roles in shaping the investment climate within these nations during the specified period.

The mediating role of intellectual capital in corporate governance and financial efficiency of Islamic banks

PurposeThe purpose of this study is to investigate the mediating role of intellectual capital (IC) on the association between corporate governance mechanism (CGM) and the financial efficiency of Islamic banks (Z-score, net investment income and loan to deposit) and verify it through standard mediation in the panel based on interaction.Design/methodology/approachThe data of this study draws from 125 full-fledged Islamic banks and windows from 26 Organization of Islamic Cooperation (OIC) over the period of 2009 to 2019. A two-step system generalize method of moment estimation is used to test the hypotheses.FindingsThe results underwrite that the inclusion of IC as a mediating variable has influenced positively the corporate governance and financial efficiency of IBs. Besides, only CEO power and Shariah supervisory board positively affect the financial efficiency of IBs. While structural capital and relational capital positively affect the financial efficiency of IBs. Apart from that, results show that the CGM has a significant relationship with the IC value of IBs.Research limitations/implicationsThese findings are valuable for policymakers and regulators to set policies to improve CG structure and effective use of IC resources to improve banking efficiency. Additionally, findings might be helpful for the bankers to proficiently use the IC as a premise to plan new strategies to get an upper hand in financial performance.Originality/valueThis study extends and contributes to the current literature by analysing the role of IC along with CG to boost the financial efficiency of banks in OIC countries.