The Impact Of Shariah Governance And Maqasid Shariah Disclosure With Mediating Role Of Board Of Directors On The Performance Of Islamic Bank In Malaysia
Shariah governance and Maqasid Shariah achievement are crucial to be disclosed to ensure accountability and transparency. The roles of the Shariah governance mechanisms in upholding Shariah compliance are usually the focus of the Shariah governance disclosure, while the Maqasid Shariah disclosure de...
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| Summary: | Shariah governance and Maqasid Shariah achievement are crucial to be disclosed to ensure accountability and transparency. The roles of the Shariah governance mechanisms in upholding Shariah compliance are usually the focus of the Shariah governance disclosure, while the Maqasid Shariah disclosure demonstrates the commitment of Islamic banks to the society and all stakeholders. This area is vital since very few studies have been conducted to investigate the relationships between SC, Shariah audit, Shariah risk, Maqasid Shariah, and the performance of Islamic banks in a single study, as well as emphasising the role of the BOD that mediates the relationship. Therefore, the objective of this study was to investigate the impact of Shariah governance and Maqasid Shariah disclosure on the performance of Islamic banks and examined the roles of the BOD in mediating the relationship. Methodologically, this study used the content analysis techniques and developed the scoring criteria based on the Likert scale to measure Shariah governance and Maqasid Shariah disclosure tested as independent variables in the model. For the dependent variable, Return on Assets (ROA), Return on Equity (ROE), and Debt Equity Ratio (DER) were tested, while the BOD function was employed to measure the mediator effect. The data were obtained from the Malaysian Islamic banks' annual reports from 2011 to 2019 and analysed using PLS-SEM (SmartPLS 3.0). The empirical findings revealed significant relationships between Shariah governance and Maqasid Shariah disclosures on the performance of Islamic Banks in some of the models tested. For instance, a significant relationship was evidenced between SC on DER and Shariah risk on ROE and DER. A significant relationship was also found between Maqasid Shariah and ROA. For the mediation effect, firstly, the result indicates that the BOD fully mediates the relationship between SC and DER. Secondly, the BOD fully mediates the relationship between Shariah audit and performance based on ROA, ROE, and DER. Thirdly, the BOD fully mediates the relationship between Shariah risk, and ROE and DER, while partially mediates between Shariah risk and ROA. This study implicates that the disclosures on Shariah governance and Maqasid Shariah signal desired information to the stakeholders, evidenced by the significant relationships between the disclosures and the financial performance of IFIs. The results of this study are valuable for regulators and practitioners as guidelines to improve their corporate performance through Shariah governance and Maqasid Shariah achievement that could serve as the tools for performance management by IFIs. |
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