Strong Boards and Risk-taking in Islamic Banks

Sabur Mollah*, Michael Skully, Eva Liljeblom

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper examines whether variations in strong boards explain the differences between risk-taking in Islamic and conventional banks. From an analysis of a pooled sample of Islamic and conventional banks, we find that strong boards in general serve their shareholders through engaging in higher risk-taking activities across both types of banks. In Islamic banks, however, the Shari’ah supervisory board (SSB) is found to mitigate risk-taking when integrated with a strong board, as religiosity restrains risk-taking. We recommend that Islamic bank regulators improve the SSB’s monitoring abilities, and thus facilitate its interaction with the board of directors.
Original languageEnglish
Peer-reviewed scientific journalReview of Corporate Finance
Volume1
Issue number1-2
Pages (from-to)135-180
Number of pages46
ISSN2693-9312
DOIs
Publication statusPublished - 29.04.2021
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Islamic Banks
  • Risk-taking
  • Strong board
  • Conventional banks
  • SSB
  • Religiosity

Areas of Strength and Areas of High Potential (AoS and AoHP)

  • AoS: Financial management, accounting, and governance

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