Abstract
We examine the impact of religious agency on the performance of GCC Islamic banks. Our results show that a high proportion of prominent religious scholars on Shariah supervisory boards (SSB) improves financial performance. However, when a prominent Shariah scholar chairs the SSB there are negative performance effects. With the high concentration of a few Shariah scholars, our findings have twofold implications: first, future research should develop approaches to test Shariah governance effectiveness in relation to the assigned mandate of SSBs; second, there is a need for revisiting Shariah compliance mechanisms to mitigate the embeddedness of Shariah scholars and their influence on Islamic bank performance.
DOI Link
Publication Date
2022-05-01
Publication Title
Journal of International Financial Markets, Institutions and Money
Volume
78
ISSN
1042-4431
Acceptance Date
2022-04-06
Deposit Date
2024-12-09
Embargo Period
2024-04-26
Funding
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.
Keywords
Islamic banking, Shariah governance, Entrenchment, Conflict of interest
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Nawaz, T., Shahzad Virk, N., & Molyneux, P. (2022) 'A Canary in a Coalmine! Religious agency and its impact on the performance of Islamic banks', Journal of International Financial Markets, Institutions and Money, 78. Available at: 10.1016/j.intfin.2022.101559
