This paper aims to examine the influence of a sustainability-based islamic corporate governance (SICG) framework on Islamic bank stability in Indonesia.
The SICG index is constructed using Principal Component Analysis, and bank stability is assessed through multiple financial indicators using Data Envelopment Analysis. The analysis covers data from commercial Islamic banks in Indonesia over 15 years (2010–2024). A fixed-effects regression model was then applied to test the hypotheses.
The findings reveal that the regular board and the sustainability board positively influence bank stability, while the Shariah board shows a negative effect. However, the SICG index highlights that the collective functioning of all governance components strengthens overall bank stability. These findings suggest that an integrated governance structure is more effective than relying on individual governance layers in isolation.
These findings highlight the practical importance of implementing SICG as a good governance approach to strengthen the long-term resilience of Islamic banks, with strong support from regulatory frameworks and policymakers.
To the best of the authors’ knowledge, this paper is the first to propose a three-layer governance framework in the context of Islamic bank stability by developing a sustainability-based governance index.
