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

Nader Virk Orcid Logo, Tasawar Nawaz, Philip Molyneux

Journal of International Financial Markets, Institutions and Money, Volume: 78, Start page: 101559

Swansea University Author: Nader Virk Orcid Logo

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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 p...

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Published in: Journal of International Financial Markets, Institutions and Money
ISSN: 1042-4431
Published: Elsevier BV 2022
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa59807
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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: Islamic banking; Shariah governance; Entrenchment; Conflict of interest
College: School of Management
Start Page: 101559