The role of the Sharia Supervisory Board and corporate governance mechanisms in enhancing Islamic performance – evidence from Indonesia
The role of the Sharia Supervisory Board and corporate governance mechanisms in enhancing Islamic performance – evidence from Indonesia

Summary/Abstract: This research aims to examine the correlation between the Sharia Supervisory Board (SSB) and corporate governance in terms of the performance of Islamic banks’ Profit-and-Loss Sharing (PLS) ratio, zakah performance and non-halal income ratio, and to analyze the relationship between risk and income for both PLS and murabahah financing and the PLS financing ratio. Non-halal income is a bank’s income that is not in accordance with Sharia law. The object of this research was a sample of eleven commercial Islamic banks in Indonesia. The data are collected from each bank’s annual report and corporate governance statement, for 2009–2016. This study uses the multiple regression analysis method. The results show that:The size and educational background of the SSB has a significant and positive effect on the zakah performance (Islamic tax), and has a negative effect on the ratio of non-halal income. The size and educational background of the SSB has no impact on the PLS financing ratio.Corporate governance has a significant and positive influence on the PLS financing ratio and zakah performance but has no influence on the non-halal income ratio.The mudharaba risk and PLS revenue have a positive impact on the PLS financing ratio.PLS financing risk and murabahah income have a negative impact on PLS financing ratio.

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