This study investigates the influence of governance mechanisms—specifically, the characteristics of the Shari’ah supervisory board—on the financial performance of Islamic banks (IBs) in Gulf Cooperation Council (GCC) countries. Specifically, it examines the role of board independence, the competence of the Shari’ah committee members, gender diversity and the size of the Shari’ah committee in shaping the performance of IBs.
Using a manually collected dataset covering 14 IBs across six GCC countries from 2012 to 2022, this study analyzes 154 firm-year observations.
The findings suggest that Shari’ah governance factors significantly affect the financial performance of IBs. The results indicate that Shari’ah board independence, Shari’ah committee members’ competence, gender diversity and Shari’ah committee size positively influence IBs’ performance. These findings contribute to the ongoing debate on corporate governance in IBs and provide practical implications for policymakers and bank executives.
To the best of the authors’ knowledge, this is among the first empirical attempts at examining the extent to which Islamic governance mechanisms may drive corporate performance. However, this study boldly shifts the focus to the independence and competence of the SSB, the frequency of meetings and the critical dimension of gender diversity. By addressing these factors, it makes a significant and timely contribution to the literature on Islamic banking in the GCC region, underscoring the importance of robust governance structures in fostering trust and performance in financial institutions.
