The relationship between risk-taking and maqasid shariah-based performance in Islamic banks: Does shariah governance matter?

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A dearth of studies linking risk-taking with maqasid shariah-based performance has been the motivation for analyzing this relationship. This study also examines the moderating effect of shariah governance. The study uses time-series data with the dynamic panel technique to examine the relationship between variables. The number of samples in this study was 75 Islamic banks operating non-window banking from 19 countries. Results prove that risk-taking has a significant adverse effect on the performance of Islamic banks. Lower risk-taking indicates a bank is more efficient, resulting in higher maqashid shariah-based performance. The governance has a positive moderating effect on the relationship between risk-taking and the performance of Islamic banks. Increasingly quality SSB strengthens the risk-taking relationship with maqashid shariah-based performance. This study implies that Islamic banks with quality SSB will be more efficient in managing risk to increase performance that complies with maqashid shariah criteria in the long term. This study concludes that managers must improve risk management in the distribution of funds so that Islamic banks are more efficient. Furthermore, policy-making authorities in each country must support the policy on the existence of SSB and the composition of the background so that it is of higher quality.

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    • Table 1. Distribution of sample
    • Table 2. Maqasid shariah index calculation
    • Table 3. Measurement of independent variables
    • Table 4. Descriptive statistics
    • Table 5. Matrix correlation
    • Table 6. Baseline full sample (2-step system GMM)
    • Table A1. List of sample Islamic banks
    • Conceptualization
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Data curation
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Formal Analysis
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Funding acquisition
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Investigation
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Methodology
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Project administration
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Resources
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Software
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Supervision
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Validation
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Visualization
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Writing – original draft
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb
    • Writing – review & editing
      Prasojo, Winwin Yadiati, Tettet Fitrijanti, Memed Sueb