Open AccessShariah Governance Characteristics and Risk-taking of Local and Foreign Islamic Banks in Malaysia: A Conceptual Model
Author(s) -
Salina Rasli,
Aza Azlina Md Kassim
Publication year - 2020
Publication title -
journal of accounting and finance in emerging economies
Language(s) - English
Resource type - Journals
eISSN - 2519-0318
pISSN - 2518-8488
DOI - 10.26710/jafee.v5i2.856
Subject(s) - corporate governance , accounting , business , islam , conceptual framework , index (typography) , risk management , originality , finance , political science , philosophy , theology , epistemology , world wide web , computer science , creativity , law
Purpose: In Malaysia, since the global financial crisis in 2007 and 2008, the low level of stability, excessive risk-taking and weak governance structure in the dual banking system has become essential for deliberation. The purpose of this research is to develop a conceptual model on the effect of Shariah governance characteristics on risk-taking between local and foreign of Islamic banks in Malaysia.
Design/Methodology/Approach: Based on prior review of indicators and findings, this research proposes a conceptual model of effective Shariah governance characteristics and its effect on risk-taking of Islamic banks. A self-develop of Shariah board index (SB-Index) based on SB size, education background, membership with IFSB and attendance in meeting. Insolvency risk, credit risk and liquidity risk are the proxy used for risk-taking measurement. The theory of stewardship and resource dependency theory are used as examples of the theories of corporate governance to support the conceptual framework suggested.
Findings: The Islamic banks in Malaysia are assumed to have effective Shariah governance and there will be low impact on risk-taking.
Implications/Originality/Value: The regulators of Islamic banks must prepare for the need to improve the current standards for corporate governance in Malaysia.