Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries

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. This study uses a sample of 45 I...

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Main Authors:	Nomran, Naji, Haron, Razali
Format:	Article
Language:	English
Published:	Emerald Group Publishing 2019
Subjects:	HG3368 Islamic Banking and Finance
Online Access:	http://irep.iium.edu.my/74453/ http://irep.iium.edu.my/74453/ http://irep.iium.edu.my/74453/ http://irep.iium.edu.my/74453/1/74453-Dual%20board%20governance%20structure%20and%20multi-bank%20performance.pdf

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spelling	iium-744532019-09-19T09:30:55Z http://irep.iium.edu.my/74453/ Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries Nomran, Naji Haron, Razali HG3368 Islamic Banking and Finance 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. This study uses a sample of 45 IBs over seven countries covering the period of 2007-2015 based on theGMMestimator – First Difference (2-step). The findings reeal 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. 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 egulators, CG practices need to be improved by giving due importance to SSB characteristics and BoD structure. 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. Emerald Group Publishing 2019-08-09 Article PeerReviewed application/pdf en http://irep.iium.edu.my/74453/1/74453-Dual%20board%20governance%20structure%20and%20multi-bank%20performance.pdf Nomran, Naji and Haron, Razali (2019) Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries. Corporate Governance: The International Journal of Business in Society, ahead-of-print (ahead-of-print). ISSN 1472-0701 (In Press) https://www.emerald.com/insight/content/doi/10.1108/CG-10-2018-0329/full/html https://doi.org/10.1108/CG-10-2018-0329
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG3368 Islamic Banking and Finance
spellingShingle	HG3368 Islamic Banking and Finance Nomran, Naji Haron, Razali Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries
description	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. This study uses a sample of 45 IBs over seven countries covering the period of 2007-2015 based on theGMMestimator – First Difference (2-step). The findings reeal 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. 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 egulators, CG practices need to be improved by giving due importance to SSB characteristics and BoD structure. 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.
format	Article
author	Nomran, Naji Haron, Razali
author_facet	Nomran, Naji Haron, Razali
author_sort	Nomran, Naji
title	Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries
title_short	Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries
title_full	Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries
title_fullStr	Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries
title_full_unstemmed	Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries
title_sort	dual board governance structure and multi-bank performance: a comparative analysis between islamic banks in southeast asia and gcc countries
publisher	Emerald Group Publishing
publishDate	2019
url	http://irep.iium.edu.my/74453/ http://irep.iium.edu.my/74453/ http://irep.iium.edu.my/74453/ http://irep.iium.edu.my/74453/1/74453-Dual%20board%20governance%20structure%20and%20multi-bank%20performance.pdf
first_indexed	2023-09-18T21:45:25Z
last_indexed	2023-09-18T21:45:25Z
_version_	1777413417063153664

Dual board governance structure and multi-bank performance: a comparative analysis between Islamic banks in Southeast Asia and GCC countries

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