Impact of Corporate Governance Mechanisms on Financial Performance, Risk-Taking and Basel Compliance of Islamic Banks

Aloysha Mendonca, Faizul Haque

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Abstract

The purpose of this study is to examine the effects of ownership concentration, board characteristics and Sharia governance financial performance, risk-taking behaviour and Basel compliance of Islamic banks. Our sample is based on 60 Islamic banks form the GCC and non-GCC countries covering a period of five years (2014-2018). We use descriptive statistics (e.g., mean and standard deviation), univariate (e.g., correlations and t-tests), multivariate (OLS regressions) techniques to analyse governance and financial data. We find that board size has a statistically negative association with profitability and valuation, and a positive association with risk-taking, asset quality and capital adequacy. In addition, board independence is found to be positively associated with valuation, asset quality and capital adequacy, and negatively associated with risk-taking behaviour. Among Sharia governance characteristics, Sharia board size shows a positive association and Sharia board expertise shows a negative association with risk-taking behaviour. Moreover, Sharia board interlocking shows positive relationship with profitability, valuation and risk-taking. Finally, we find ownership concentration to be positively associated to valuation and risk-taking behaviour of IBs.
Original languageEnglish
Publication statusPublished - 16 Jan 2020
Event5th International Conference on Emerging Research Paradigms in Business and Social Sciences 2020 - Middlesex University Dubai, Dubai, United Arab Emirates
Duration: 14 Jan 202016 Jan 2020
https://mdx.ac.ae/erpbss2020

Conference

Conference5th International Conference on Emerging Research Paradigms in Business and Social Sciences 2020
Abbreviated titleERPBSS 2020
CountryUnited Arab Emirates
CityDubai
Period14/01/2016/01/20
Internet address

Keywords

  • Islamic Banking
  • Ownership and board characteristics
  • Sharia governance
  • Financial performance and risk-taking
  • Capital adequacy and asset quality

ASJC Scopus subject areas

  • Accounting
  • Finance

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    Mendonca, A., & Haque, F. (2020). Impact of Corporate Governance Mechanisms on Financial Performance, Risk-Taking and Basel Compliance of Islamic Banks. Paper presented at 5th International Conference on Emerging Research Paradigms in Business and Social Sciences 2020, Dubai, United Arab Emirates.