A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks

Nader Virk; Tasawar Nawaz; Philip Molyneux

doi:10.1016/j.intfin.2022.101559

A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks

Nader Virk, Tasawar Nawaz, Philip Molyneux

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

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.

Original language	English
Article number	101559
Number of pages	11
Journal	Journal of International Financial Markets, Institutions and Money
Volume	78
Early online date	26 Apr 2022
DOIs	https://doi.org/10.1016/j.intfin.2022.101559
Publication status	Published - 1 May 2022
Externally published	Yes

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 16 Peace, Justice and Strong Institutions

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10.1016/j.intfin.2022.101559Licence: CC BY

Cite this

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title = "A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks",

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.",

keywords = "Conflict of interest, Entrenchment, Islamic banking, Shariah governance",

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AU - Virk, Nader

AU - Nawaz, Tasawar

AU - Molyneux, Philip

PY - 2022/5/1

Y1 - 2022/5/1

N2 - 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.

AB - 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.

KW - Conflict of interest

KW - Entrenchment

KW - Islamic banking

KW - Shariah governance

UR - https://www.scopus.com/pages/publications/85130203184

UR - https://doi.org/10.1016/j.intfin.2023.101777

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DO - 10.1016/j.intfin.2022.101559

M3 - Article

AN - SCOPUS:85130203184

SN - 1042-4431

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JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

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ER -

A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks

Abstract

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