The Theoretical Linkages between the Shariah Supervisory Board (SSB) and Stakeholder Theory in the Islamic Financial Institutes: An Empirical Review

Keywords: Stakeholder Theory, Shariah Supervisory Board, IFSB.

Abstract

As part the Corporate Governance, the Shariah Supervisory Board has a significant role in the Islamic Financial Institutes for ensuring its conformity with the Shariah standards. In general, the Corporate governance should be played essential roles to design and promote principles of fairness, accountability, and transparency to meet of all the stakeholder’s rights such as shareholders, the workers, the depositors, and the customers, etc. however, there are still struggling for convincing arguments to justify stakeholders’ participation in governance in the traditional conventional systems rather, the Stakeholder theory has become one of the most important developments in the field of business ethics, which is widely regarded as being a key element in Islamic banking, making it of extreme relevance in Islam’s principles of property rights, commitment. Therefore, this study aims to justify the theoretical linkages or relationship between the role of the Shariah Supervisory Board of Islamic banking and stakeholders’ model from the existing empirical literature review. The summary of empirical review findings revealed that the stakeholder concept in a way that overcomes many of the existing limitations and provides a different understanding of the identity and meaning of Islamic banking, specifically in terms of its relationship to stakeholder groups, such as Islamic banks are a connected body, they should have control over the external environment and should implement hierarchies. Moreover, the developed a conceptual framework to do empirical research by applying real data to test the significance of the above relationships for further policy explorations.

References

Abdullah Saif Alnasser, S., & Muhammed, J. (2012). Introduction to corporate governance from Islamic perspective. Humanomics, 28(3), 220-231.

Abdul Rahman, A. R. (1998). Issues in corporate accountability and governance: An Islamic perspective. American Journal of Islamic Social Sciences, 15, 55-70.

Akhtar, S. (2006). Syariah Compliant Corporate Governance. In: Nasser Saidi, Keynote Address by the Governor of the State Bank of Pakistan at the Annual Corporate Governance Conference, Dubai, United Arab Emirates, November. Hawkamah Institute for Corporate Governance.

Abu-Tapanjeh, A.M. (2009). Corporate governance from the Islamic perspective: A comparative analysis with OECD principles. Critical Perspectives on Accounting, 20(5), 556–567.

Ansoff, H.I. (1987). The emerging paradigm of strategic behavior. Strategic Management Journal, 8(6), 501–515.

Azid, T., Asutay, M. & Burki, U. (2007). Theory of the firm, management and stakeholders: An Islamic perspective. Islamic Economic Studies, 15(1), 1–30.

Asutay, M. (2007). Conceptualisation of the second-best solution in overcoming the social failure of Islamic banking and finance: Examining the overpowering of homoislamicus by homoeconomicus. International Journal of Economics, Management and Accounting, 15(2),167–195.

Bhatti, M. & Bhatti, M.I. (2010). Toward understanding Islamic corporate governance issues in Islamic finance. Asian Politics & Policy, 2(1), 25–38.

Bhatti, M. and Bhatti, I. (2009). Development in legal issues of corporate governance in Islamic finance. Journal of Economic and Administrative Sciences, 25(1), 67–91.

Bley, J., & Kuehn, K. (2004). Conventional versus Islamic finance: student knowledge and perception in the United Arab Emirates. International journal of Islamic financial services, 5(4), 17-30.

Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review, 443- 465.

Chapra, M.U. (2007). Islam and Economic Development: A Strategy for Development with Justice and Stability. New Delhi, India: Adam Publishers.

Dusuki, A.W. & Abdullah, N.I. (2007). Maqasid al-shari’ah, maslahah and corporate social responsibility. The American Journal of Islamic Social Sciences, 24(1), 25–45.

Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of management Review, 20(1), 65-91.

Erol, C., & El-Bdour, R. (1989). Attitudes, behaviour, and patronage factors of bank customers towards Islamic banks. International Journal of Bank Marketing, 7(6), 31-37.

Echchabi, A., & Aziz, H. A. (2014). Shari’ah issues in Islamic banking: a qualitative survey in Malaysia. Qualitative Research in Financial Markets.

Elena, G.C. (2012). Theoretical framework for corporate governance. Ovidius University Annals, Economic Sciences Series, 12(1), 493–498.

Freeman, R.E. (1994). The politics of stakeholder theory. Bus Ethics Quart, 4(4), 409–421.

Freeman, R.E. (1984). Strategic Management: A Stakeholder Approach. Boston, MA: Pitman.

Grassa, R. (2013). Shariah supervisory system in Islamic financial institutions: New issues and challenges: A comparative analysis between Southeast Asia models and GCC models, Humanomics, 29(4), 333-348.

Ghayad, R. (2008). Corporate governance and the global performance of Islamic banks, Humanomics, 24(3), 207-216.

Guthrie, J., Petty, R. & Ricceri, F. (2006). The voluntary reporting of intellectual capital: Comparing evidence from Hong Kong and Australia. Journal of Intellectual Capital, 7(2), 254–271.

Grais, W., & Pellegrini, M. (2006). Corporate governance in institutions offering Islamic financial services: issues and options. The World Bank.

Hasan, Z. (2009). Corporate governance: Western and Islamic perspectives. International Review of Business Research Papers, 5(1), 277-293.

IFSB. (2006). Guiding Principles on Corporate Governance for Institutions Offering Only Islamic Financial Services (excluding Islamic insurance (takaful) institutions and Islamic mutual funds),IFSB,Kuala Lumpur.

Islam, K. M. A, Alam, I., & Hossain, S. A. (2014). Examination of profitability between Islamic banks and conventional banks in Bangladesh: A comparative study. Research in Business and Management, 1(1), 78-89. Retrieved from http://www.macrothink.org/journal/index.php/rbm/article/view/4894

Islam, K. M. A. (2016a). Corporate Governance: Conjecture and Modernism, Indian Journal of Science, 23(86), 798-817. Retrieved from https://discoveryjournals.org/science/current_issue/2016/index.htm

Islam, K. M. A. (2016b). History and Role of Islamic Finance, International Journal: Discovery, 52(252), 2410-2418.Retrieved from https://discoveryjournals.org/discovery/current_issue/v52/n252/index.htm

Islam, K. M. A. (2016c). Corporate Governance of Banking Institutions: Bangladesh Perspective, ISBN 978-3-659-89005-5,LAP LAMBERT Academic Publishing, Germany.

Islam, K. M. A., & Barghouthi, O. A. (2017a). Corporate Governance: An Islamic Institution Perspective. International Journal of Islamic Banking and Finance Research,1(1), 29-32. Retrieved from http://www.cribfb.com/journal/index.php/ijibfr/article/view/36

Islam, K. M. A. (2017b). Finance: An Islamic Perspective. International Journal of Islamic Banking and Finance Research, 1(1), 1-5. Retrieved from http://www.cribfb.com/journal/index.php/ijibfr/article/view/32

Iqbal, Z. & Mirakhor, A. (2004). Stakeholders model of governance in islamic economic system. Islamic Economic Studies, 11(2), 43–64.

Kasim, N., Htay, S. N. N., & Salman, S. A. (2013). Shariah governance for Islamic capital market: A step forward. International Journal of Education and Research, 1(6), 1-14.

Metawa, S. A., & Almossawi, M. (1998). Banking behavior of Islamic bank customers: perspectives and implications. International journal of bank marketing, 16(7), 299-313.

Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of financial economics, 64(2), 215-241.

Norita, M. N., & Shamsul Nahar, A. (2004). Voluntary disclosure and corporate governance among financially distressed firms in Malaysia. The Electronic Journal of the Accounting Standards Interest Group of AFAANZ,3(1).

Naser, K., Jamal, A., & Al-Khatib, K. (1999). Islamic banking: a study of customer satisfaction and preferences in Jordan. International journal of bank marketing, 17(3), 135-151.

Rowley, T.J. (1997). Moving beyond dyadic ties: A network theory of stakeholder influences. Academy of Management Review 22(4), 887–910.

Roberts, R.W. (1992). Determinants of corporate social responsibility disclosure: an application of stakeholder theory. Accounting, Organizations and Society 17(6), 595–612.

Safieddine, A. (2009). Islamic financial institutions and corporate governance: New insights for agency theory. Corporate Governance: An International Review, 17(2), 142-158.

Yusoff, W.F.W. and Alhaji, I.A. (2012). Insight of corporate governance theories. Journal of Business and management 1(1), 52–6.

Published
2019-12-15
How to Cite
Islam, K. M. A., & Bhuiyan, A. B. (2019). The Theoretical Linkages between the Shariah Supervisory Board (SSB) and Stakeholder Theory in the Islamic Financial Institutes: An Empirical Review. International Journal of Accounting & Finance Review, 4(2), 43-49. https://doi.org/10.46281/ijafr.v4i2.436
Section
Regular Research Article/ Short Communication Article