The effect of shariah board characteristics, risk-taking, and maqasid shariah on an Islamic bank’s performance

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Shariah supervisory boards are a key feature of shariah governance (SG), providing additional monitoring and oversight. A suitable SG mechanism enhances risk mitigation and improves Islamic bank (IB) performance without violating shariah principles. This study examines the impact of the shariah supervisory board (SSB), maqasid shariah, and risk-taking on Islamic bank performance globally. Quantitative research design with a Dynamic panel regression approach is used with a two-step generalized method of moments (GMM) with data from the Bankscope database for 2014–2018. The findings of this study show that characteristics of SSB and risk-taking have a significant impact on IB performance. This study proves that higher SSB characteristics in terms of size, expertise, level of education, cross-membership and reputation encourage the better performance of Islamic banks. Higher risk-taking illustrates that Islamic banks are more efficient, resulting in better financial performance. Compliance with maqasid sharia indicates that sharia banks comply with Islamic laws so that the resulting performance meets financial aspects and sharia principles. SSB functions as a monitor for Islamic banks so that they operate according to sharia principles, which are reflected in the maqasid sharia elements. Therefore, a higher quality SSB and a higher maqasid shariah index score positively affect the financial performance of IBs.

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    • Table 1. Descriptive statistics
    • Table 2. Pairwise matrix correlation
    • Table 3. Baseline full sample
    • Table 4. Robustness check for the GCC sample
    • Table 5. Robustness check for the non-GCC sample
    • Conceptualization
      Memed Sueb
    • Data curation
      Memed Sueb, Prasojo, Muhfiatun, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Formal Analysis
      Memed Sueb, Prasojo, Muhfiatun, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Funding acquisition
      Memed Sueb, Muhfiatun
    • Investigation
      Memed Sueb, Prasojo, Muhfiatun, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Methodology
      Memed Sueb, Prasojo, Rosyid Nur Anggara Putra
    • Resources
      Memed Sueb, Prasojo, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Supervision
      Memed Sueb, Prasojo, Muhfiatun
    • Visualization
      Memed Sueb, Prasojo, Muhfiatun, Lailatis Syarifah
    • Writing – original draft
      Memed Sueb, Prasojo, Muhfiatun, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Writing – review & editing
      Memed Sueb
    • Software
      Prasojo, Muhfiatun, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Validation
      Prasojo, Lailatis Syarifah, Rosyid Nur Anggara Putra
    • Project administration
      Muhfiatun, Lailatis Syarifah, Rosyid Nur Anggara Putra