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The Influence of Islamic Governance on Minimizing Non-Compliance with Sharia

Author

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  • Tettet Fitrijanti

    (Padjajaran University, Dipati Ukur Street No. 35, 40132, Bandung, Indonesia Author-2-Name: Winwin Yadiati Author-2-Workplace-Name: Padjajaran University, Dipati Ukur Street No. 35, 40132, Bandung, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Objective - One of the operational objectives of sharia banks is to comply with sharia principles. Therefore, the non-compliance of sharia banks to sharia law may be prevented by implementing Islamic Good Corporate Governance (GCG), which is controlled by the Sharia Supervisory Board (SSB), the board of directors, and the board of management. Methodology/Technique - In this study, sharia non-compliance is defined as all cases of disobedience found in the report of sharia banks, covering things such as non-halal income, criminal law violations, civil law violations, and fraud. The unit of analysis of this research is sharia banks in Indonesia. Seven sharia banks were used as the study sample for the period between 2012 and 2015. The source of data for this study comprised of GCG annual reports. The data analysis method and hypothesis testing was conducted using a factor analysis and multiple regression analysis. Findings - The findings show that higher levels of supervision from the SSB tend to minimize the instanc of sharia non-compliance as a whole, criminal and civil law violations, and fraud, although not to a level that is statistically significant. The influence of the board of management on non-halal income was negative, although statistically insignificant. The influence of the supervision from both the board of directors and the board of management on overall sharia non-compliance is also not statistically significant. Novelty - The influence of the board of management on non-halal income was negative, although statistically insignificant. The influence of the supervision from both the board of directors and the board of management on overall sharia non- compliance is also not statistically significant.

Suggested Citation

  • Tettet Fitrijanti, 2018. "The Influence of Islamic Governance on Minimizing Non-Compliance with Sharia," GATR Journals afr159, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:afr159
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    References listed on IDEAS

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    1. Novi Puspitasari, 2017. "Analysis of Islamic Banking Efficiency Using Maqashid Shariah Approach (Study on Islamic Banks in Indonesia and Malaysia)," GATR Journals jfbr134, Global Academy of Training and Research (GATR) Enterprise.
    2. Andres, Pablo de & Vallelado, Eleuterio, 2008. "Corporate governance in banking: The role of the board of directors," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2570-2580, December.
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    4. Atul Shah, 1998. "Exploring the influences and constraints on creative accounting in the United Kingdom," European Accounting Review, Taylor & Francis Journals, vol. 7(1), pages 83-104.
    5. Hasan, Syed Akif & Subhani, Muhammad Imtiaz & Osman, Ms. Amber, 2012. "Consumer Criteria for the Selection of an Islamic Bank: Evidence from Pakistan," MPRA Paper 40384, University Library of Munich, Germany.
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    More about this item

    Keywords

    Sharia Non-compliance; Islamic Bank; Islamic GCG; Sharia Supervisory Board; Board of Directors; Board of Management.;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M19 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Other

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