Shari’ah Board’s Role in Shaping Financial Performance: Evidence from the Islamic Banking Industries of Pakistan and Malaysia

Abstract

This study aims to investigate the impact of the Shari’ah Board (SB) characteristics on financial performance of Islamic Banks (IBs)a compression between Pakistan and Malaysia. Shari’ah Board’s characteristics are taken as independent variables i.e. Shari’ah Board size, Shari’ah Board Qualification of Islamic study Qualification of Fiqh, Cross-membership and reputation and expertise. A sample size of 6 Islamic Banks is used to test the hypothesis of the study from Pakistan and Malaysia for the period of 2008 to 2017 using the Generalized Least Square Method.

The result shows that Shari’ah Board characteristics have a significant effect on the financial performance of IBs in Pakistan and Malaysia. There is strong support for a significant relationship between SB cross membership, reputation and expertise. In addition, the SB size and qualification association with IBs performance is very important in improving the financial performance of IBs for both countries. Malaysia IBs applies the pro-active model that most extreme intervention of regulatory agencies.