NEXUS BETWEEN SHARIA GOVERNANCE AND FINANCIAL PERFORMANCE: EVIDENCE FROM INDONESIAN ISLAMIC BANKING

Hanifiyah Yuliatul Hijriah, Himmatul Kholidah, Bani Alkausar, Nisful Laila, Muhammad Ubaidillah Al Mustofa

Abstract


This study aims to empirically test the Islamic governance of Islamic banks which are reviewed based on the indicators of the Sharia Supervisory Board (SSB) on the financial performance of Islamic banking in Indonesia. In view of the lack of availability of regulations that regulate optimal standards and minimum structure of SSB in Islamic banks, this needs to be studied further on these conditions empirically. This research is quantitative based research. This study examines the relationship between SSB size, SSB cross-membership, SSB educational qualification, SSB expertise and financial performance using sample of 14 Islamic banking for the period 2014-2020. The analysis technique in this study uses Multiple Regression Analysis. The results showed that the SSB Size, Education, Financial and Accounting Expertise could not contribute to the financial performance of Islamic banking, Meanwhile, Cross-Membership negatively affects the dependent variable. In general, the performance of Islamic banking showed a satisfactory financial performance with a relatively low risk of failure. The result indicates the low contribution of SSB in directing the managerial activities of Islamic banking. Most SSB in Islamic banking has a background contrary to the background of banking management and finance. This study tries to present a portrait of SSB for Islamic banking performance so that the results of the study can be a recommendation for the government and policy makers to pay attention to SSB and its competence to assist the development of Islamic banks through clear and comprehensive regulations

Keywords


sharia governance; financial performance; Islamic banking; sharia supervisory board; financial sustainability

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