Corporate governance and financial performance of Islamic banks: new international evidence

The present study examines the corporate governance and financial performance of Islamic banks. More specifically, its aim is to investigate the relationship of corporate governance variables such as board size, the presence of female board members, the duality of the chief executive officer, the proportion of block-holders, the existence of a Shari’ah (Islamic Law) committee, and the size of the Shari’ah committee, with financial performance measures in terms of return on assets and return on equity. The study is based on a panel dataset of 111 Islamic banks from 24 countries over the period 2008–2014 and includes some important variables related to Islamic banks, making a valuable contribution to the literature on corporate governance in Islamic finance. Also, this study, in addition to age and size, considers some macroeconomic control variables like GDP and CPI as well as bank specifications, for instance, the debt-to-equity ratio, to improve the robustness of the results. Moreover, it suggests involving investment account holders in the corporate governance process by nominating a representative to the board.