IDEAS home Printed from https://ideas.repec.org/a/pal/ijodag/v20y2023i4d10.1057_s41310-023-00177-5.html
   My bibliography  Save this article

Islamic finance and governance indicators: empirical evidence from Islamic finance-permitting countries

Author

Listed:
  • Puteri Nur Balqis Megat Mazlan

    (Universiti Sains Malaysia)

  • Nafez Fayez Hersh

    (Universiti Sains Malaysia)

  • Tajul Ariffin Masron

    (Universiti Sains Malaysia)

  • Nurhafiza Abdul Kader Malim

    (Universiti Sains Malaysia)

Abstract

Despite being greatly progressive for more than 45 years covering even Muslim minority countries, the development of Islamic finance in some countries is not supported by well-established governance. This paper aims to empirically re-examine the effects of the governance components on Islamic finance in 45 Islamic finance-permitting countries. The study utilizes the dynamic panel GMM approach from the data spanning from 2012 to 2019. We find insignificant effect of regulation in Islamic finance in the region of developed countries, Muslim minority countries, and other Arab countries. We also find that corporate governance is not statistically significant in MENA and non-Asian countries. These results reinforce the need for a new type of regulation based on product requirements, policies, and procedures. Thus, the governance indicators can be understood by the wider world and assist in gaining more acceptance for the Islamic finance industry.

Suggested Citation

  • Puteri Nur Balqis Megat Mazlan & Nafez Fayez Hersh & Tajul Ariffin Masron & Nurhafiza Abdul Kader Malim, 2023. "Islamic finance and governance indicators: empirical evidence from Islamic finance-permitting countries," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(4), pages 344-358, December.
    • Handle: RePEc:pal:ijodag:v:20:y:2023:i:4:d:10.1057_s41310-023-00177-5
    DOI: 10.1057/s41310-023-00177-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41310-023-00177-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41310-023-00177-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Heiko Hesse & Andreas (Andy) Jobst & Juan Solé, 2008. "Trends and Challenges in Islamic Finance," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 9(2), pages 175-193, April.
    2. M. E. Arouri & H. Ben Ameur & N. Jawadi & F. Jawadi & W. Louhichi, 2013. "Are Islamic finance innovations enough for investors to escape from a financial downturn? Further evidence from portfolio simulations," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3412-3420, August.
    3. Badi H. Baltagi, 2008. "Forecasting with panel data," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(2), pages 153-173.
    4. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    5. Ibrahim, Mansor H. & Law, Siong Hook, 2014. "Social capital and CO2 emission—output relations: A panel analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 528-534.
    6. Simon Archer & Rifaat Abdel Karim & Talla Al-Deehani, 1998. "Financial Contracting, Governance Structures and the Accounting Regulation of Islamic Banks: An Analysis in Terms of Agency Theory and Transaction Cost Economics," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 2(2), pages 149-170, June.
    7. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    8. Paltrinieri, Andrea & Dreassi, Alberto & Migliavacca, Milena & Piserà, Stefano, 2020. "Islamic finance development and banking ESG scores: Evidence from a cross-country analysis," Research in International Business and Finance, Elsevier, vol. 51(C).
    9. Jamel Boukhatem & Fatma Ben Moussa, 2018. "The effect of Islamic banks on GDP growth: Some evidence from selected MENA countries," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(3), pages 231-247, September.
    10. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    2. Massimo Colombo & Annalisa Croce & Samuele Murtinu, 2014. "Ownership structure, horizontal agency costs and the performance of high-tech entrepreneurial firms," Small Business Economics, Springer, vol. 42(2), pages 265-282, February.
    3. Junhua Li & Wenli Cheng, 2015. "Country Size, Economic Structure and Transaction Efficiency: An Asymmetric Spatial General Equilibrium Model of Income Differences across Nations," Monash Economics Working Papers 17-15, Monash University, Department of Economics.
    4. Michal Madr, 2016. "Economic Development as a Factor of Democratisation: Evidence from Post-Socialist Economies," MENDELU Working Papers in Business and Economics 2016-70, Mendel University in Brno, Faculty of Business and Economics.
    5. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    6. Susana López‐Bayón & Marta Fernández‐Barcala & Manuel González‐Díaz, 2020. "In search of agri‐food quality for wine: Is it enough to join a geographical indication?," Agribusiness, John Wiley & Sons, Ltd., vol. 36(4), pages 568-590, October.
    7. Li, Tongxia & Munir, Qaiser & Abd Karim, Mohd Rahimie, 2017. "Nonlinear relationship between CEO power and capital structure: Evidence from China's listed SMEs," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 1-21.
    8. repec:ipg:wpaper:35 is not listed on IDEAS
    9. Huang, Hui & Shi, Xiaojun & Zhang, Shunming, 2011. "Counter-cyclical substitution between trade credit and bank credit," Journal of Banking & Finance, Elsevier, vol. 35(8), pages 1859-1878, August.
    10. Matěj Kuc & Petr Teplý, 2023. "Are European commercial banks more profitable than cooperative banks? Evidence from a low interest rate environment," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4385-4400, October.
    11. Ahmed, Walid M.A., 2020. "Corruption and equity market performance: International comparative evidence," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    12. Mykhayliv, Dariya & Zauner, Klaus G., 2017. "The impact of equity ownership groups on investment: Evidence from Ukraine," Economic Modelling, Elsevier, vol. 64(C), pages 20-25.
    13. Annalisa Croce & José Martí, 2017. "Financial constraints in family firms and the role of venture capital," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 44(1), pages 119-144, March.
    14. Franco Rubino & Francesco Napoli, 2020. "What Impact Does Corporate Governance Have on Corporate Environmental Performances? An Empirical Study of Italian Listed Firms," Sustainability, MDPI, vol. 12(14), pages 1-21, July.
    15. Nguyen, Thi Tuyet Mai, 2017. "An examination of independent directors in Vietnam," OSF Preprints ay6dv, Center for Open Science.
    16. repec:ipg:wpaper:2013-035 is not listed on IDEAS
    17. Ali, Searat & Liu, Benjamin & Su, Jen Je, 2017. "Corporate governance and stock liquidity dimensions: Panel evidence from pure order-driven Australian market," International Review of Economics & Finance, Elsevier, vol. 50(C), pages 275-304.
    18. Estrin, Saul & Meyer, Klaus E. & Nielsen, Bo B. & Nielsen, Sabina, 2016. "Home country institutions and the internationalization of state owned enterprises: A cross-country analysis," Journal of World Business, Elsevier, vol. 51(2), pages 294-307.
    19. Gupta, C.P. & Bedi, Prateek, 2020. "Corporate cash holdings and promoter ownership," Emerging Markets Review, Elsevier, vol. 44(C).
    20. Vallascas, Francesco & Mollah, Sabur & Keasey, Kevin, 2017. "Does the impact of board independence on large bank risks change after the global financial crisis?," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 149-166.
    21. Ridwan Lanre Ibrahim & Usama Al-Mulali & Kazeem Bello Ajide & Abubakar Mohammed & Mamdouh Abdulaziz Saleh Al-Faryan, 2023. "The Implications of Food Security on Sustainability: Do Trade Facilitation, Population Growth, and Institutional Quality Make or Mar the Target for SSA?," Sustainability, MDPI, vol. 15(3), pages 1-23, January.
    22. Sobia Ehsan & Attiya Yasmin Javid, 2018. "Bank ownership structure, regulations and risk-taking: evidence from commercial banks in Pakistan," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 17(3), pages 185-209, November.

    More about this item

    Keywords

    Islamic finance; Governance; Corporate governance; Shariah governance;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:ijodag:v:20:y:2023:i:4:d:10.1057_s41310-023-00177-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.