JEFMS Journal

Google Scholar

Article Pdf

---

ABSTRACT:

The study of risk in Islamic banks emphasizes more on the general risk of Islamic banks, this general risk in Islamic banks arises from transactions unrelated to special transactions of Islamic banks. The profit and loss sharing system implemented by Islamic banks raises equity investment risk (EIR). This study uses the agency theory approach in explaining EIR. In the agency theory approach, the risk monitoring committee has the responsibility of evaluating and monitoring the risk management in Islamic banks. The characteristics of risk monitoring committee members can affect the capability of the risk monitoring committee to provide risk management assessments and policies and can affect the effectiveness of the risk monitoring committee in carrying out its duties and responsibilities. The study population was 109 Islamic banks spread across 18 countries in ASEAN and the Gulf Cooperation Council, where the sample was observed in 2021 during the peak of COVID-19. The results of this study indicate that the gender diversity of the risk management committee and the risk management monitoring committee’s expertise in accounting/risk management have a significant negative effect on equity investment risk.

KEYWORDS:

Equity Investment Risk, Expertise, Gender, Risk Taking, Risk Monitoring Committee, Islamic Banks.

REFERENCES:

1) Abid, A., Gull, A. A., Hussain, N., & Nguyen, D. K. (2021). Risk governance and bank risk-taking behavior: Evidence from Asian banks. Journal of International Financial Markets, Institutions and Money, 75(May), 101466. a. https://doi.org/10.1016/j.intfin.2021.101466

2) Abou-El-Sood, H. (2019). Corporate governance and risk-taking: the role of board gender diversity. Pacific Accounting Review, 31(1), 19–42. https://doi.org/10.1108/PAR-03-2017-0021

3) Abou-El-Sood, H. (2021). Board gender diversity, power, and bank risk-taking. International Review of Financial Analysis, 75(March), 101733. https://doi.org/10.1016/j.irfa.2021.101733

4) Abu Hussain, H., & Al-Ajmi, J. (2012). Risk management practices of conventional and Islamic banks in Bahrain. Journal of Risk Finance, 13(3), 215–239. https://doi.org/10.1108/15265941211229244

5) Abubakar Siddique, M., Rashid, A., & Tahir, U. (2022). Factors affecting the credibility of Islamic banking Sharī’ah approvals: Perception-based empirical study. Borsa Istanbul Review, 23(2), 426–442. a. https://doi.org/10.1016/j.bir.2022.11.010

6) Ajmi, H., Abd Aziz, H., Kassim, S., & Mansour, W. (2019). Adverse selection analysis for profit and loss sharing contracts. International Journal of Islamic and Middle Eastern Finance and Management, 12(4), 532–552. a. https://doi.org/10.1108/IMEFM-03-2018-0079

7) Alam, S. M. S., Chowdhury, M. A. M., & Razak, D. B. A. (2021). Research evolution in banking performance: a bibliometric analysis. Future Business Journal, 7(1), 1–19. https://doi.org/10.1186/s43093-021-00111-7

8) Alandejani, M., & Asutay, M. (2017). Nonperforming loans in the GCC banking sectors: Does the Islamic finance matter? Research in International Business and Finance, 42(June), 832–854. https://doi.org/10.1016/j.ribaf.2017.07.020

9) Andari, D. (2019). Harmonization of Accounting Standards for Islamic Financial Institutions: Evidence of the Adoption of FAS No. 17 in Indonesia. Jurnal Dinamika Akuntansi Dan Bisnis, 6(1), 51–70. https://doi.org/10.24815/jdab.v6i1.10861

10) Ashraf, A., Kabir Hassan, M., & Basher, S. A. (2015). Loan loss provisioning in OIC countries: Evidence from conventional vs. Islamic banks. Journal of King Abdulaziz University, Islamic Economics, 28(1), 23–62. https://doi.org/10.4197/Islec.28-1.2

11) Aslam, E., & Haron, R. (2021). Corporate governance and risk-taking of Islamic banks: evidence from OIC countries. Corporate Governance (Bingley), 21(7), 1460–1474. https://doi.org/10.1108/CG-08-2020-0311

12) Attah-Boakye, R., Adams, K., Kimani, D., & Ullah, S. (2020). The impact of board gender diversity and national culture on corporate innovation: A multi-country analysis of multinational corporations operating in emerging economies. Technological Forecasting and Social Change, 161(August), 120247. https://doi.org/10.1016/j.techfore.2020.120247

13) Baehaqi, A. (2014). Usulan Model Sistem Pengawasan Syariah Pada Perbankan Syariah Di indonesia. Jurnal Dinamika Akuntansi Dan Bisnis, 1(2), 119–133. https://doi.org/10.24815/jdab.v1i2.3583

14) Basiruddin, R., & Ahmed, H. (2020). Corporate governance and Shariah non-compliant risk in Islamic banks: evidence from Southeast Asia. Corporate Governance (Bingley), 20(2), 240–262. https://doi.org/10.1108/CG-05-2019-0138

15) Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Neal, T. L. (2009). The audit committee oversight process. Contemporary Accounting Research, 26(1), 65–122. https://doi.org/10.1506/car.26.1.3

16) Ben Zeineb, G., & Mensi, S. (2018). Corporate governance, risk and efficiency: evidence from GCC Islamic banks. Managerial Finance, 44(5), 551–569. https://doi.org/10.1108/MF-05-2017-0186

17) Bitar, M., Hassan, M. K., Pukthuanthong, K., & Walker, T. (2015). The performance of Islamic vs. Conventional Banks: A Note on the Suitability of Capital Ratios. 1–57.

18) Chaffai, M., & Hassan, M. K. (2019). Technology Gap and Managerial Efficiency: A Comparison between Islamic and Conventional Banks in MENA. Journal of Productivity Analysis, 51(1), 39–53. https://doi.org/10.1007/s11123-019-00544-x

19) Daly, S., & Frikha, M. (2017). Determinants of bank Performance: Comparative Study Between Conventional and Islamic Banking in Bahrain. Journal of the Knowledge Economy, 8(2), 471–488. https://doi.org/10.1007/s13132-015-0261-8

20) Duan, Y., El Ghoul, S., Guedhami, O., Li, H., & Li, X. (2021). Bank systemic risk around COVID-19: A cross-country analysis. Journal of Banking and Finance, 133, 106299. https://doi.org/10.1016/j.jbankfin.2021.106299

21) Dupire, M., & Slagmulder, R. (2019). Risk governance of financial institutions: The effect of ownership structure and board independence. Finance Research Letters, 28, 227–237. https://doi.org/10.1016/j.frl.2018.05.001

22) Felício, J. A., Rodrigues, R., Grove, H., & Greiner, A. (2018). The influence of corporate governance on bank risk during a financial crisis. Economic Research-Ekonomska Istrazivanja , 31(1), 1078–1090. a. https://doi.org/10.1080/1331677X.2018.1436457

23) Gulamhussen, M. A., & Santa, S. F. (2015). Female directors in bank boardrooms and their influence on performance and risk-taking. Global Finance Journal, 28(January 2010), 10–23. https://doi.org/10.1016/j.gfj.2015.11.002

24) Hamza, H. (2016). Does investment deposit return in Islamic banks reflect PLS principle? Borsa Istanbul Review, 16(1), 32–42. https://doi.org/10.1016/j.bir.2015.12.001

25) Heath, J. (2011). Agency Theory. Finance Ethics: Critical Issues in Theory and Practice, 14(1), 125–142. a. https://doi.org/10.1002/9781118266298.ch7

26) IFSB. (2005). Guiding Principles of Risk Management for Institutions ( Other Than Insurance Institutions ) Offering Only Islamic Financial Services. Islamic Financial Service Board, December, 1–36.

27) Isa, M., & Lee, S. P. (2020). Does the Shariah committee influence risk-taking and performance of Islamic banks in Malaysia? Journal of Islamic Accounting and Business Research, 11(9), 1739–1755. https://doi.org/10.1108/JIABR-12-2018-0207

28) Jabari, H. N., & Muhamad, R. (2022). Diversity and risk taking in Islamic banks: Does public listing matter? Borsa Istanbul Review, 22(3), 546–559. https://doi.org/10.1016/j.bir.2021.07.003

29) Jizi, M. I., Salama, A., Dixon, R., & Stratling, R. (2014). Corporate Governance and Corporate Social Responsibility Disclosure: Evidence from the US Banking Sector. Journal of Business Ethics, 125(4), 601–615. https://doi.org/10.1007/s10551-013-1929-2

30) Khan, I., & Zahid, S. N. (2020). The impact of Shari’ah and corporate governance on Islamic banks performance: evidence from Asia. International Journal of Islamic and Middle Eastern Finance and Management, 13(3), 483–501. https://doi.org/10.1108/IMEFM-01-2019-0003

31) Khan, M. H., Fraz, A., Hassan, A., & Abedifar, P. (2020). Female board representation, risk-taking and performance: Evidence from dual banking systems. Finance Research Letters, 37(March), 101541. https://doi.org/10.1016/j.frl.2020.101541

32) Khatib, S. F. A., Abdullah, D. F., Elamer, A. A., & Abueid, R. (2021). Nudging toward diversity in the boardroom: A systematic literature review of board diversity of financial institutions. Business Strategy and the Environment, 30(2), 985–1002. https://doi.org/10.1002/bse.2665

33) Kuncoro, H. F. T., Anam, S., & Sanusi, M. (2020). Analisis Pengaruh Dana Pihak Ketiga Dan Non Performing Financing Terhadap Return On Asset Pada BPRS Di Indonesia. Jurnal Manajemen Dan Bisnis Indonesia, 6(1), 88–94. https://doi.org/10.32528/jmbi.v6i1.3538

34) Malik, M. F., Nowland, J., & Buckby, S. (2021). Voluntary adoption of board risk committees and financial constraints risk. International Review of Financial Analysis, 73, 101611. https://doi.org/10.1016/j.irfa.2020.101611

35) Miah, M. D., & Sharmeen, K. (2015). Relationship between capital, risk and efficiency. International Journal of Islamic and Middle Eastern Finance and Management, 8(2), 203–221. https://doi.org/10.1108/imefm-03-2014-0027

36) Minton, B. A., Taillard, J. P., Williamson, R., The, S., Analysis, Q., April, N., Minton, B. A., Taillard, J. P., & Williamson, R. (2014). Financial Expertise of the Board , Risk Taking , and Performance : Evidence from Bank Holding Companies Published by : Cambridge University Press on behalf of the University of Washington School of Business Administration Stable URL : https://www.jstor.or. The Journal of Financial and Quantitative Analysis, 49(2), 351–380.

37) Mollah, S., Hassan, M. K., Al Farooque, O., & Mobarek, A. (2017). The governance, risk-taking, and performance of Islamic banks. Journal of Financial Services Research, 51(2), 195–219. https://doi.org/10.1007/s10693-016-0245-2

38) Mollah, S., Liljeblom, E., & Mobarek, A. (2021). Heterogeneity in independent non-executive directors’ attributes and risk-taking in large banks. Journal of Corporate Finance, 70(October 2019), 102074. a. https://doi.org/10.1016/j.jcorpfin.2021.102074

39) Mollah, S., & Zaman, M. (2015). Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks. Journal of Banking and Finance, 58, 418–435. https://doi.org/10.1016/j.jbankfin.2015.04.030

40) Mukhibad, H., & Setiawan, D. (2022). Shariah supervisory board attributes and corporate risk-taking in Islamic banks. Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2158607

41) Mukhibad, H., Setiawan, D., Aryani, Y. A., & Falikhatun, F. (2024). Corporate governance and Islamic bank risk – do the directors’ and the Shariah board’s diversity attributes matter? Corporate Governance (Bingley). a. https://doi.org/10.1108/CG-08-2022-0348

42) Nahar, S., Azim, M. I., & Hossain, M. M. (2020). Risk disclosure and risk governance characteristics: evidence from a developing economy. International Journal of Accounting and Information Management, 28(4), 577–605. https://doi.org/10.1108/IJAIM-07-2019-0083

43) Nurhayati, S. (2019). Metodologi Penelitian Praktis (2nd ed.). Universitas Pekalongan Press.

44) Purwoko, D., & Sudityatno, B. (2013). Faktor-Faktor yang Mempengaruhi Kinerja Bank (Studi Empirik pada Industri Perbankan di Bursa Efek Indonesia). Jurnal Bisnis Dan Ekonomi, 20(1), 25–39.

45) Rashid, A. (2018). Board independence and firm performance: Evidence from Bangladesh. Future Business Journal, 4(1), 34–49. https://doi.org/10.1016/j.fbj.2017.11.003

46) Saeed Jagirani, T., Chee Chee, L., & Binti Kosim, Z. (2023). Board characteristics and firm value: The moderating role of capital adequacy. Investment Management and Financial Innovations, 20(2), 205–214. a. https://doi.org/10.21511/imfi.20(2).2023.18

47) Safiullah, M., & Shamsuddin, A. (2019). Risk-adjusted efficiency and corporate governance: Evidence from Islamic and conventional banks. Journal of Corporate Finance, 55(February 2018), 105–140. a. https://doi.org/10.1016/j.jcorpfin.2018.08.009

48) Salih, A., Ghecham, M. A., & Al-Barghouthi, S. (2019). The impact of global financial crisis on conventional and Islamic banks in the GCC countries. International Journal of Finance and Economics, 24(3), 1225–1237. a. https://doi.org/10.1002/ijfe.1713

49) Saona, P., & Azad, M. A. K. (2020). Examining Managerial Misbehavior in Asian Banks through Loan Loss Provisions*☆. Asia-Pacific Journal of Financial Studies, 49(4), 581–624. https://doi.org/10.1111/ajfs.12307

50) Shahzad Virk, N., Nawaz, T., & Molyneux, P. (2022). A canary in a Coalmine! religious agency and its impact on the performance of Islamic banks. Journal of International Financial Markets, Institutions and Money, 78, 101559. https://doi.org/10.1016/j.intfin.2022.101559

51) Srairi, S. (2019). Transparency and bank risk-taking in GCC Islamic banking. Borsa Istanbul Review, 19, S64–S74. https://doi.org/10.1016/j.bir.2019.02.001

52) Srairi, S., Bourkhis, K., & Houcine, A. (2022). Does bank governance affect risk and efficiency? Evidence from Islamic banks in GCC countries. International Journal of Islamic and Middle Eastern Finance and Management, 15(3), 644–663. https://doi.org/10.1108/IMEFM-05-2020-0206

53) Srivastav, A., & Hagendorff, J. (2016). Corporate Governance and Bank Risk-taking. Corporate Governance: An International Review, 24(3), 334–345. https://doi.org/10.1111/corg.12133

54) Trinh, V. Q., Elnahass, M., Salama, A., & Izzeldin, M. (2020). Board busyness, performance and financial stability: does bank type matter? European Journal of Finance, 26(7–8), 774–801. https://doi.org/10.1080/1351847X.2019.1636842

55) Vafeas, N. (1999). Board meeting frequency and firm performance. Journal of Financial Economics, 53(1), 113–142. https://doi.org/10.1016/S0304-405X(99)00018-5