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Corporate Governance in Islamic Banks: The Efficiency of the Shariah Supervisory Board

Corporate Governance in Islamic Banks: The Efficiency of the Shariah Supervisory Board
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Author(s): Sami Ben Mim (IHEC Sousse, Tunisia & University of Sousse, Tunisia)and Yosra Mbarki (Institute of Advanced Business Studies of Sfax, Tunisia)
Copyright: 2021
Pages: 16
Source title: Corporate Governance and Its Implications on Accounting and Finance
Source Author(s)/Editor(s): Ahmad Alqatan (University of Portsmouth, UK), Khaled Hussainey (University of Portsmouth, UK)and Hichem Khlif (University of Sfax, Tunisia)
DOI: 10.4018/978-1-7998-4852-3.ch015

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Abstract

This study investigates the efficiency of the Shariah supervisory board as a corporate governance mechanism in Islamic banks. The authors mainly seek to examine the effect of the Shariah board's composition (size and academic background of its members) on the performance of Islamic banks. They also try to highlight the transmission channels explaining this effect, and compare the efficiency of the Shariah board with that of traditional corporate governance mechanisms, namely the board of directors. The empirical investigation is based on a sample of 72 Islamic banks from 19 countries. Estimation results suggest that the Shariah board positively affects the Islamic banks performance through the number of Islamic Shariah scholars. This effect is mainly due to the size and cost transmission channels. These results are robust to different performance measures. On the other hand, results show that the board of directors' size produces a positive effect on a bank's performance, offering evidence for complementarity between traditional and Islamic governance mechanisms.

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