Sharia disclosure, sharia supervisory board and the moderating effect of regulatory framework: The impact on soundness of islamic banking

Research output: Chapter in Book/Report/Conference proceedingChapterpeer-review

Abstract

The unique characteristic of Islamic bank leads in governance and disclosure. Using stakeholder, signaling, and market discipline theory, governance and adequate disclosure may increase bank soundness. This study aims to investigate the relationship of sharia disclosure and Sharia Supervisory Board in influencing Islamic bank soundness in the different regulatory framework of the country. Using purposive sampling, the research covered 84 Islamic banks in 16 countries during the period 2013–2015 with lag data of Islamic bank soundness. The result shows sharia disclosure influences on Islamic bank soundness for management efficiency, capital adequacy ratio, asset quality, and liquidity. The results also show that sharia disclosure mediates the indirect effect of SSB on Islamic bank soundness. The regulatory framework (sharia accounting standard and SSB regulation) shows moderating effect of regulation framework proved on the association of sharia disclosure with management efficiency, capital, and liquidity. The effect is indirectly depending on the regulatory framework for proxy management efficiency, capital, and liquidity. The implication of the research suggests that sharia disclosure could increase the market discipline mechanism of Islamic bank stream. The Islamic bank can increase the transparency using sharia disclosure as a branding for increasing public trust, even though in the deficient Islamic bank regulation countries.

Original languageEnglish
Title of host publicationInternational Symposia in Economic Theory and Econometrics
PublisherEmerald Group Holdings Ltd.
Pages291-321
Number of pages31
DOIs
Publication statusPublished - 2021

Publication series

NameInternational Symposia in Economic Theory and Econometrics
Volume28
ISSN (Print)1571-0386

Keywords

  • Islamic bank soundness
  • Sharia Accounting Standard
  • Sharia disclosure
  • Sharia regulatory framework
  • Sharia supervisory board
  • SSB regulation

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