Work

Corporate governance and Islamic law compliance risk

Year: 2022

Type: article

Abstract: This study examines the influence of the Shariah Supervisory Board (SSB), Board of Directors (BOD), Risk Officers (RO), Audit Committee, and market competition (Lerner) on the Islamic Law Compliance Risk (ILCR). We use a sample of full-fledged Islamic banks in Indonesia with an observation period of 2009–2019. Data analysis uses Fixed Effect Model (FEM). Our results show that SSB and BOD are not proven to be able to control ILCR. ILCR can be decreased by increasing the number of audit committees and the proportion of independent RO. In addition, the Lerner index has a positive influence ILCR. The results of the robustness test also confirm the results of this study. This research extends the previous studies on evaluating the risk-taking of Islamic Banks beyond the common risk (insolvency, liquidity, credit, and market), particularly the unique risks faced by Islamic banks. This study recommends increasing the effectiveness of SSB and BOD supervision on bank operations, increasing the ILCR.

Source: Cogent Economics & Finance

DOI: 10.1080/23322039.2022.2111057

Authors: Hasan Mukhibad, Ahmad Nurkhin, Kuat Waluyo Jati, Prabowo Yudo Jayanto

Institution: State University of Semarang

Language: English

Topic: Islamic Finance and Banking Studies

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $1,165