Summary and critical analysis of empirical literature on SSB effects on Performance of IBs
| Authors | Independent variables | Dependent variables | Analytical Approach | Findings | Critical review |
|---|---|---|---|---|---|
| Abdel-Baki and Leone Sciabolazza (2014) | CG index: Consists of six core CG themes and 40 sub-themes which cover selection of BoD, ownership, disclkosure, and transparency, compensation schemes, and auditors and supervisors including SSB | Efficiency of IBs: Proxy measures of bank efficiency, which cover: Growth and sustainability; intermediation efficiency; profit maximization; and reduction of risks | Multiple regression analysis | (+) CG index They also detected misaligned compensation structures for BoD Further, poor CG leads to higher risk exposures | They neglected to examine the impact of SSB as a separate mechanism or at a least as a core CG theme. Instead of that, they used a general CG index, and then they only provided a general conclusion about CG. It was supposed to examine the impact of each separate CG mechanism, e.g. BoD, SSB, and ownership on IB performance to get a meaningful conclusion Furthermore, out of 40 items, the CG index consists of six sub-themes items related to SSB. These six items only cover some attributes and issues related to SSB, while many other important ones were ignored, e.g. education, reputation, remuneration amount, etc. Finally, the authors measured IB efforts in enhancing CG using a questionnaire, while the annual reports which may provide more accurate information about the quality of CG, especially across the time they were neglected |
| Grassa and Matoussi (2014a) |
| ROA ROE | Regression analysis t-test | (+) Director fees (+) CEO duality (+) CEO age (+) SSB expertise For IBs in Southeast Asian countries: (-) SSB size (−) SSB cross-membership | Although the study covered the period between 2000 and 2009, it neglected the potential effect of the financial crisis of 2008 The study neglected many other important SSB characteristics such as education, reputation, and remuneration. It also did not examine the total impact of SSB using SSB score/index In addition, it did not control for endogeneity issue at all. Further, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Musibah and Alfattani (2014) |
| CSR Mediators: Performance (ROA and ROE) | Fixed effects models Hierarchical regression | (+) SSBE on CSR (+) CEE on CSR (+) SCE on CSR (+) SSBE on performance Also, performance has a mediating impact Between (SSBE, CEE, SCE) and CSR | The study employed the SSB education level to measure the Sharī'ah supervision. This single proxy was not accurate to reflect the total impact of SG as there is a multitude of other variables relating to the SSB characteristics that may determine how effective the SSB conducts its task as discussed earlier. Also, the applied methods in analyzing the mediating effect were not appropriate as SEM can provide more accurate results. Indeed, SEM is the most commonly used method in analyzing mediating relationships. Further, the study did not control for endogeneity issue. Finally, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Mollah and Zaman (2015) |
| ROIAE ROIAA ROAE ROAA Tobin's Q | Random effect (GLS) Two-step system (GMM) | (−) BoD size (−) BoD independence (-) CEO chair Duality (−) CEO internal (+) SSB size | Although the study examined many important issues related to the SSB in IBs and takes the financial crisis of 2008 into account, it employed the SSB size to measure the SSB impact as a single proxy which is not enough. Therefore, it did not give a meaningful interpretation The study neglected many other important SSB characteristics that should be investigated such as the cross-membership, education, reputation, etc. Although the study emphasized the need for a regulatory mechanism for SSBs to be more effective, it ignored highlighting and examining such regulatory mechanisms that differ across jurisdictions as will be shown later in this study. In addition, the study neglected measuring IB performance using the Sharī'ah approach. It only employed conventional and market-based measurements of IB performance which are common for measuring the CBs' performance |
| Rahim and Mahat (2015) | RM: (LLP, CAR, TDP, GDP, CBLR, and INF) CG : (CEO, BoD size, REM, EA, AS, and CRA) RG: (CRO, RCM, and SSB member) | ROA ROE Profit margin Mediator: RG | Structural Equation Modelling (SEM) | RM and RG affect performance RG has a mediating effect | The study was conducted based on data for only one year (2014) which is not enough to reflect the change of CG, RM, and performance practices in IBs across time SSB mechanism was measured using a single proxy which is not enough as well that the study neglected many other important SSB characteristics In addition, the proxy is not clear if it implies SSB size or another thing. Importantly, SSB mechanism was supposed to come under the CG variable beside BoD mechanism, not under RG as the study did. Finally, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Kusuma and Ayumardani (2016) | CG efficiency Bank size | ROA | DEA to calculate the CG efficiency Paired samples test Regression analysis | (+) CG efficiency | They neglected to examine the impact of SSB as a separate mechanism. Also, the study only focused on SSB size and neglected the other important SSB characteristics. Furthermore, the study did not control for endogeneity issue at all. Additionally, the study only employed bank size as a control variable while there are more variables that should be controlled such as bank age Besides that, the study only used ROA to measure IB performance and neglected measuring IB performance using the Sharī'ah approach and market-based measurement Finally, the study only focused on IBs in Indonesia, and then the findings cannot be generalized to the other banks across different countries |
| Almutairi and Quttainah (2017) |
| ROA ROE Tobin's Q | t-test Multivariate data Analysis Clustered regression Two-stage least-squares regression | (+) SSB size (+) Outside members on SSB (+) SSB cross-membership (+) SSB membership in international financial services board (IFSB) (+) SSB education | The study did not use a measurement to examine the total impact of SSB mechanism on performance of IBs Also, the study did not control for endogeneity issue. Instead, they used a panel regression model with fixed effects for robustness test. The study also neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Mollah et al. (2017) | CG index (CGI):
| Z-score ROA | Random effect (GLS) Two-step system (GMM) | (−) CGI on IB Z-score (+) CGI on IBs ROA | The study did not measure the SSB impact directly. Instead, it only assumed that IBs have SG structure while CBs do not have such a structure. There is no investigation of SSB mechanism effect on IB performance. Finally, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Nawaz (2017a) |
| Tobin's Q | OLS regression | (+) HCI (+) SCI (+) BoD size (+) Role duality (−) SSB size | For all the three studies, Nawaz (2017a, 2017b & 2017c), they did not use a measurement to examine the total impact of SSB mechanism on the performance of IBs They also employed OLS regression which is not enough of an analysis method, especially when the endogeneity issue was ignored. The three studies neglected many other important SSB characteristics as they only focused on SSB size All the three studies almost examined the same hypotheses, meaning they repeated the same issues Regarding the performance measurements, the three studies neglected measuring IB performance using the Sharī'ah approach. Furthermore, for the studies of Nawaz (2017a & 2017c), the performance of IBs was measured using market-based measurement, while the other financial and accounting ratios were neglected |
| Nawaz (2017b) | VAIC HCE SCE CEE SSB size | ROA Tobin's Q | OLS regression | Pre-crisis & post-crisis on ROA: (+) VAIC (+) HCE (+) CEE Pre-crisis on Tobin's Q: (+) VAIC (+) HCE (+) SCE (+) CEE (−) SSB-size Post-crisis on Tobin's Q: (+) VAIC (+) HCE (+) CEE (−) SSB-size | |
| Nawaz (2017c) |
| Tobin's Q | OLS regression | Pre-crisis and post-crisis: (+) HCI Pre-crisis and during and post-crisis: (+) BoD size During crisis: (−) SSB size Pre-crisis and during crisis: (+) CEO power | |
| Quttainah et al. (2017) |
| ROA ROE Asset growth | OLS cluster robust standard-error estimation Two-stage-least squares regression (including instrumental variable) To address endogeneity | (+) SSB size (+) SSB interlocks (+) BoD independence (+) BoD interlocks (+) SSB education | The study examined three SSB characteristics, namely, SSB size, interlocks, and education, and hence, neglected many other important SSB characteristics such as reputation and remuneration. Also, it did not combine the SSB characteristics together in a measurement to reflect the total impact of SG/SSB. Further, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Ajili and Bouri (2018) |
| ROA ROE | Random effect (GLS) Durbin–Wu–Hausman test to check endogeneity | No significant impact has been found | The study was limited to IBs in GCC countries. Also, it only takes into account three SSB characteristics in developing the SSB score and neglected some other important ones such as cross-membership and reputation. The study also neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Farag et al., (2018) |
| ROA ROE ROOA (return on operating assets) ROOE (return on operating equity) | Fixed effects model GMM | (+) BoD size (+) SSB size | The study used only SSB size to measure the SSB impact and hence, neglected many other important SSB characteristics as discussed earlier. Further, the study did not use a measurement to examine the total impact of SSB mechanism on performance of IBs. Finally, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Hakimi et al. (2018) |
| ROA ROE | GLS RE GMM | (+) BoD size (+) BoD duality (+) SSB size | The study only focused on IBs in Bahrain. It also examined two SSB characteristics (size and expertise) and neglected many other important board characteristics. As the above studies, the study neglected measuring IB performance using the Sharī'ah approach |
| Mezzi (2018) |
| Efficiency | DEA Regression analysis | (+) BoD size (+) BoD independence (+) Concentration of ownership (+) existence of a central SSB (CSGM) | The study only focused on efficiency to measure performance. It neglected measuring IB performance using the Sharī'ah approach, accounting profitability ratios and market-based measurement. Also, it only examined SSB size and neglected many other SSB characteristics and adopting SSB score to measure the total impact The study also focused on CSGM and neglected the opposite model, namely, decentralised SG model (DSGM) |
| Nomran et al. (2018) |
| ROA ROE ROIAE | GMM | (+) SSB size (+) SSB cross-membership (-) SSB educational qualification (+) SSB reputation (-) SSB experience (-) SSB change in the composition | The study focused only on Malaysia with adopting a pro-active model, and therefore, extending the investigation to include countries that adopt the different models may provide a better view of the best SG practices for IBs Investigating the SSB characteristics is not enough as the evaluation should be done using SSB score or proxy that can measure the total effect of SSB. Thus, the SSB proxy will reflect the overall effect of SSB, while the SSB characteristics will show why the overall effect is strong or weak. The study also neglected measuring IB performance using the Sharī'ah approach and market-based measurement |
| Zeineb and Mensi (2018) |
| Efficiency Z-score | (DEA)/stochastic frontier analysis (SFA) Seemingly unrelated regressions | (-) SSB size (-) CEO duality (-) Institutional ownership | Investigating the SSB size is not enough as there are many important characteristics which should be examined. Further, the evaluation of SG on efficiency should be done using SSB score or proxy that can measure the total effect of SSB. Also, no attempt has been done to control the endogeneity issue in this study. Finally, the study neglected measuring IB performance using the Sharī'ah approach, accounting profitability ratios, and market-based measurement |
| Authors | Independent variables | Dependent variables | Analytical | Findings | Critical review |
|---|---|---|---|---|---|
| CG index: Consists of six core CG themes and 40 sub-themes which cover selection of BoD, ownership, discl | Efficiency of IBs: Proxy measures of bank efficiency, which cover: Growth and sustainability; intermediation efficiency; profit maximization; and reduction of risks | Multiple regression analysis | (+) CG index | They neglected to examine the impact of SSB as a separate mechanism or at a least as a core CG theme. Instead of that, they used a general CG index, and then they only provided a general conclusion about CG. It was supposed to examine the impact of each separate CG mechanism, e.g. BoD, SSB, and ownership on IB performance to get a meaningful conclusion | |
BoD meeting BoD size Non-executive Outside director Woman director Old director Foreign director Director fees CEO tenure CEO duality CEO founder CEO age Number of BoD committees SSB size SSB cross-membership SSB expertise SSB women | ROA | Regression analysis | (+) Director fees | Although the study covered the period between 2000 and 2009, it neglected the potential effect of the financial crisis of 2008 | |
SSBE (education level) Capital employee Structure capital Human capital | CSR | Fixed effects models | (+) SSBE on CSR | The study employed the SSB education level to measure the Sharī'ah supervision. This single proxy was not accurate to reflect the total impact of SG as there is a multitude of other variables relating to the SSB characteristics that may determine how effective the SSB conducts its task as discussed earlier. Also, the applied methods in analyzing the mediating effect were not appropriate as SEM can provide more accurate results. Indeed, SEM is the most commonly used method in analyzing mediating relationships. Further, the study did not control for endogeneity issue. Finally, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement | |
BoD size BoD independence CEO chair duality CEO internal SSB size | ROIAE | Random effect (GLS) | (−) BoD size | Although the study examined many important issues related to the SSB in IBs and takes the financial crisis of 2008 into account, it employed the SSB size to measure the SSB impact as a single proxy which is not enough. Therefore, it did not give a meaningful interpretation | |
| RM: (LLP, CAR, TDP, GDP, CBLR, and INF) | ROA | Structural Equation Modelling (SEM) | RM and RG affect performance | The study was conducted based on data for only one year (2014) which is not enough to reflect the change of CG, RM, and performance practices in IBs across time | |
| CG efficiency | ROA | DEA to calculate the CG efficiency | (+) CG efficiency | They neglected to examine the impact of SSB as a separate mechanism. Also, the study only focused on SSB size and neglected the other important SSB characteristics. Furthermore, the study did not control for endogeneity issue at all. Additionally, the study only employed bank size as a control variable while there are more variables that should be controlled such as bank age | |
SSB size Outside members on SSB SSB cross-membership SSB membership in international financial services board (IFSB) SSB expertise SSB education | ROA | (+) SSB size | The study did not use a measurement to examine the total impact of SSB mechanism on performance of IBs | ||
| CG index (CGI): BoD size Independent directors Female director BoD meeting BoD attendance BoD committees Chair independence Chair/CEO split Internal CEO CEO qualification CEO experience CEO tenure | Z-score | Random effect (GLS) | (−) CGI on IB Z-score | The study did not measure the SSB impact directly. Instead, it only assumed that IBs have SG structure while CBs do not have such a structure. There is no investigation of SSB mechanism effect on IB performance. Finally, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement | |
HCI SCI BoD size BoD composition Role duality SSB size | Tobin's Q | OLS regression | (+) HCI | For all the three studies, | |
| VAIC | ROA | OLS regression | Pre-crisis & post-crisis on ROA: (+) VAIC | ||
HCI BoD size SSB size CEO power BoD independence Audit committee size | Tobin's Q | OLS regression | Pre-crisis and post-crisis: (+) HCI | ||
SSB size SSB interlocks BoD independence BoD interlocks SSB education | ROA | OLS cluster robust standard-error estimation | (+) SSB size | The study examined three SSB characteristics, namely, SSB size, interlocks, and education, and hence, neglected many other important SSB characteristics such as reputation and remuneration. Also, it did not combine the SSB characteristics together in a measurement to reflect the total impact of SG/SSB. Further, the study neglected measuring IB performance using the Sharī'ah approach and market-based measurement | |
CG score BOD score AC score SSB score (existence of SSB+SSB size, SSB Expertise, SSB education) | ROA | Random effect (GLS) Durbin–Wu–Hausman test to check | No significant impact has | The study was limited to IBs in GCC countries. Also, it only takes into account three SSB characteristics in developing the SSB score and neglected some other important ones such as cross-membership and reputation. The study also neglected measuring IB performance using the Sharī'ah approach and market-based measurement | |
BoD size BoD independence SSB size | ROA | Fixed effects model | (+) BoD size | The study used only | |
BoD size BoD duality Independent BoD Institutional administrators in BoD SSB size SSB expertise | ROA | GLS RE | (+) BoD size | The study only focused on IBs in Bahrain. It also examined two SSB characteristics (size and expertise) and neglected many other important board characteristics. As the above studies, the study neglected measuring IB performance using the Sharī'ah approach | |
BoD size BoD independence Concentration of ownership SSB size Existence of a central SSB (CSGM) | Efficiency | DEA | (+) BoD size | The study only focused on efficiency to measure performance. It neglected measuring IB performance using the Sharī'ah approach, accounting profitability ratios and market-based measurement. Also, it only examined SSB size and neglected many other SSB characteristics and adopting SSB score to measure the total impact | |
SSB size SSB cross-membership SSB educational qualification SSB reputation SSB experience SSB change in the composition | ROA | GMM | (+) SSB size | The study focused only on Malaysia with adopting a pro-active model, and therefore, extending the investigation to include countries that adopt the different models may provide a better view of the best SG practices for IBs | |
SSB size CEO duality Institutional ownership Private ownership Foreign ownership | Efficiency | (DEA)/stochastic frontier analysis (SFA) | (-) SSB size | Investigating the SSB size is not enough as there are many important characteristics which should be examined. Further, the evaluation of SG on efficiency should be done using SSB score or proxy that can measure the total effect of SSB. Also, no attempt has been done to control the endogeneity issue in this study. Finally, the study neglected measuring IB performance using the Sharī'ah approach, accounting profitability ratios, and market-based measurement |
Notes: The studies were ordered according to the publication date and alphabetically when the date is the same
Source: Own interpretation.
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