Indah Anisykurlillah, FE Akuntansi (2023) Open innovation in shariah compliance in Islamic banks – Does shariah supervisory board attributes matter? Journal of Open Innovation: Technology, Market, and Complexity, 9. ISSN 2199-8531

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Abstract

This study extends the literature on shariah compliance in Islamic banks (IBs) based on interest free returns for Investment Account Holders (IAH) and to examine the role of the attributes of the shariah supervisory board (SSB) on shariah compliance. The study sample included 102 fully-fledged IBs from 27 countries over the period from 2010 to 2019. We use panel data estimation techniques and the system generalized method of moments (GMM) estimation to address potential endogeneity concerns. The results show that banks with more members on their SSBs are likely to have less shariah compliance. The findings also indicate that cross-membership and economic/finance/accounting expertise of SSB has positive impact on shariah compliance. This impact of SSB to increase shariah compliance is more pronounced in unlisted IBs than listed IBs. The results can be used by different stakeholders such as policy makers, bank supervisory agencies, other boards, and managers of IBs to mitigate shariah compliance

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