IDEAS home Printed from https://ideas.repec.org/p/rim/rimwps/18-40.html
   My bibliography  Save this paper

Does Corporate Governance add value to Islamic banks? A quantitative analysis of cost efficiency and financial stability

Author

Listed:
  • Christos Alexakis

    (Rennes School of Business, France)

  • Khamis Al-Yahyaee

    (Department of Economics and Finance, Sultan Qaboos University, Oman)

  • Emmanuel Mamatzakis

    () (University of Sussex Business School, UK; Rimini Centre for Economic Analysis)

  • Asma Mobarek

    (Cardiff Business School, Cardiff University, UK)

  • Sabur Mollah

    (Hull University Business School, University of Hull, UK)

  • Vasileios Pappas

    (School of Management, University of Kent, UK)

Abstract

In this paper, we examine the impact of corporate governance practices on cost efficiency and financial stability for a sample of Islamic and conventional banks. In our analysis we use a set of corporate governance variables which include, board size, board independence, director gender, board meetings, board attendance, board committees, chair independence and CEO characteristics. The above corporate governance data set was constructed by the study of annual reports and other documents of Islamic banks, and is unique in this field. In our analysis we employ stochastic frontier analysis and panel VAR (PVAR) models in order to quantify long run and short run statistical relationships between operational efficiency of Islamic banks and corporate governance practices. According to our results, Islamic and conventional banks exhibit important differences in the effects of corporate governance practices on cost efficiency and financial stability. Our results warrant caution when Islamic banks select international corporate governance practices. A blind general adoption of corporate governance practices of conventional banks might lead to losses in terms of efficiency of Islamic banks as such adoption of, for example, a third layer of binding practices over and above the already existing ones imposed by the Sharia Board and the Board of Directors may lead to cumbersome business operations. In this respect we believe that our results may be of a certain value to regulators, policy makers and managers of Islamic banks.

Suggested Citation

  • Christos Alexakis & Khamis Al-Yahyaee & Emmanuel Mamatzakis & Asma Mobarek & Sabur Mollah & Vasileios Pappas, 2018. "Does Corporate Governance add value to Islamic banks? A quantitative analysis of cost efficiency and financial stability," Working Paper series 18-40, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:18-40
    as

    Download full text from publisher

    File URL: http://rcea.org/RePEc/pdf/wp18-40.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Mariani Abdul-Majid & David Saal & Giuliana Battisti, 2010. "Efficiency in Islamic and conventional banking: an international comparison," Journal of Productivity Analysis, Springer, vol. 34(1), pages 25-43, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Islamic banking; corporate governance; stochastic frontier analysis; panel VAR;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:rim:rimwps:18-40. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marco Savioli). General contact details of provider: http://edirc.repec.org/data/rcfeait.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.