Keywords: Islamic Financing Institutions, Risk Taking, Shariah Supervisor Board


The study aims to examine the influences of Shariah Supervisory Board (SSB) characteristics and risk-taking among Islamic Financial Institutions (IFIs) in Bangladesh. The study conducts dynamic short panel data regarding the annual report of quoted 14 IFIs in Bangladesh from 2013 to 2018. The study has shown the first and second lag of dependent variables and applied them under the dynamic GMM model in Stata software. Risk-taking is the most prejudicial issue that needs to be justified by findings. The hypothesis result of SSB size is positive and insignificant due to its size. It means SSB is less essential to reducing the risk-taking of IFIs in Bangladesh. The study also finds that the positive result of scholars in SSB is put in the right place that supports reducing excess risk-taking. It could be a valuable source of knowledge for reducing risk-taking on the risk committee.

JEL Classification Codes: G34.

Author Biographies

Md. Mohidul Islam, Universiti Selangor, Malaysia

Ph.D. Fellow, Faculty of Business and Accountancy, Universiti Selangor, Malaysia

Abul Bashar Bhuiyan, Universiti Selangor, Malaysia

Ph.D., Associate Professor, Faculty of Business and Accountancy, Universiti Selangor, Malaysia

Aza Azlina Md Kassim, Management and Science University, Malaysia

Ph.D., Associate Professor, Faculty of Business Management and Professional Studies, Management and Science University, Malaysia

Salina Rasli, Universiti Selangor, Malaysia

Ph.D., Senior Lecturer, Department of Accountancy, Finance and Mumalat, Faculty of Business and Accountancy, Universiti Selangor, Malaysia


Akbar, S., Kharabsheh, B., Poletti-Hughes, J., & Shah, S. Z. A. (2017). Board structure and corporate risk-taking in the UK financial sector. International Review of Financial Analysis, 50, 101-110.

Ahmed, H. (2009). Financial crisis, risks and lessons for Islamic finance. ISRA International Journal of Islamic Finance, 1(1), 7-32.

Ali, S. S. (2004, February). Islamic modes of finance and associated liquidity risks. In conference on Monetary Sector in Iran: Structure, Performance & Challenging Issues, February, Tehran, Iran.

Alkdai, H. K. H., & Hanefah, M. M. (2012). Audit committee characteristics and earnings management in Malaysian Shariah-compliant companies. Business and Management Review, 2(2), 52-61.

Alman, M. (2012). Shari’ah supervisory board composition effects on Islamic banks’ risk-taking behavior. Journal of Banking Regulation, 14(1), 134-163.

Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error components models. Journal of econometrics, 68(1), 29-51.

Arvelo, M., Bell, J.-L., Novak, C., Rose, J., & Venugopal, S. (2008). Morgan Stanley's Approach to Assessing Credit Risks in the Microfinance Industry. Journal of Applied Corporate Finance, 20(1), 124-134. doi:10.1111/j.1745-6622.2008.00175.x

Abdullah, A., Khan, A. Q., & Nazir, N. (2012). A comparative study of credit risk management: a Case study of domestic and foreign banks in Pakistan. Academic Research International, 3(1), 371.

Askari, H., Iqbal, Z., Krichene, N., & Mirakhor, A. (2010). The stability of Islamic finance creating resilient financial environment for a secure future. John Wiley and Sons(Asia)the stability of Islamic finance creating resilient, page-xvii).

Bakar, M. D. (2016). Shariah Minds in Islamic Finance. Amanie Media: Kuala Lumpur.

Baltagi. (2005). Econometric Analysis of Panel Data. John Wiley and Sons, Chichester.

Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models, Journal of Econometrics, 87, 115-143.

Brown, I., Steen, A., & Foreman, J. (2009). Risk management in corporate Governance: A review and proposal. Corporate Governance: An International Review, 17(5), 546-558.

Cheng, S. (2008). Board size and the variability of corporate performance. Journal of financial economics, 87(1), 157-176.

Council, F. R. (2011). Boards and Risk–A Summary of Discussions with Companies. Investors and Advisers, London: FRC.

Cull, R., Demirgu¨ ç‐Kunt, A., & Morduch, J. (2007). Financial performance and outreach: A global analysis of leading microbanks. The Economic Journal, 117(517), F107-F133.

Fayed, M., & Ezzat, A. (2017). Do principal-agent conflicts impact performance and risk-taking behavior of Islamic banks? Proceedings of Middle East Economic Association, 19(2), 32-67.

Fitch. (2009). Microfinance – Testing its resilience to the global financial crisis. New York:

Farook, S. Z., & Farooq, M. O. (2011). Shariah governance for Islamic finance: Challenges and pragmatic solutions. Available at SSRN 1813483.

Gujarati, D. N. (2004). Basic Econometrics. McGraw-Hill Companies. New York, NY, USA.

Gabrielsson, J., & Huse, M. (2005). Outside directors in SME boards: a call for theoretical reflections. Corporate Board: role, duties and composition, 1(1), 28-37.

Gambin, L. (2004). Gender differences in the effect of health on wages in Britain. Retrieved from

Garas, S. N. (2012). The control of the Shari'a Supervisory Board in the Islamic financial institutions. International Journal of Islamic and Middle Eastern Finance and Management, 5(1), 8 - 24.

Garas, S. N., & Pierce, C. (2010). Shari’a supervision of Islamic financial institutions. Journal of Financial Regulation and Compliance, 18(4), 386-407.

Ghenimi, A., Chaibi, H., & Omri, M. A. B. (2017). The effects of liquidity risk and credit risk on bank stability: Evidence from the MENA region. Borsa Istanbul Review, 17(4), 238-248.

Ginena, & Hamid. ( 2015). The Sharī‘ah Supervisory board, in Foundations of Sharī‘ah Governance of Islamic Banks, John Wiley & Sons, Ltd, Chichester, UK.

Gorney, A., & Salvendy, K. (2011). The Elements of Work Environment in the Improvement Process of Quality Management System Structure Advances in Human Factors, Ergonomics, and Safety in Manufacturing and Service Industries, 599-606.

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.

Grassa, R., & La Manouba, T. (2013). Shariah supervisory system in Islamic financial institutions New issues and challenges: a comparative analysis between Southeast Asia models and GCC models. Humanomics "Emerald Group Publishing Limited, 29(4), 333-348.

Harris, M., & Raviv, A. (2008). A theory of board control and size. The Review of Financial Studies, 21(4), 1797-1832.

Hawileh, R. A., Abu-Obeidah, A., Abdalla, J. A., & Al-Tamimi, A. (2015). Temperature effect on the mechanical properties of carbon, glass and carbon–glass FRP laminates. Construction and building materials, 75, 342-348.

Hemmati, Y., & Vakilalroaia, Y. (2015). Study of Relation between Credit Risk Management of Paid Loans to Natural Customers and Overdue Receivables of Bank Mellat(Case study: Management of branches of Bank Mellat, Semnan province). DU Journal, Humanities and Social Sciences, 8(4), 739-781.

Hermalin, B. E., & Weisbach, M. S. (2003). Boards of Directors As an Endogenously Determined Institution: A Survey of the Economic Literature. Federal Reserve Bank of New York Economic Policy Review, 9(1), 7-26.

IFSB. (2014). Prospects and Challenges in the Development of Islamic Finance for

Jedidia, K. B., & Hamza, H. (2015). Determinants of liquidity risk in Islamic banks: A panel study. Islamic Management and Business, 2(2), 137-146.

Kamali, M. H. (2008). Maqasid al-Shariah Made Simple (Vol. 13): IIIT.

Khan, T., & Ahmed, H. (2001). Risk Management An Analysis of Issues in Islamic Financial Industry. Occasional Paper No. 5, IRTI, Islamic Development Bank, Jeddah - Saudi Arabia. Retrieved from

Lahsasna, A. (2014). Shariah Issues and resolution in Cotemporary Islamic Banking And Finance. publication:IBFIM,.page-18,chapter-1.

Matsuda, N., & Matsuo, Y. (2017). Impact of MBA on entrepreneurial success: Do entrepreneurs acquire capacity through the program or does MBA only signal gifted talent and experience. Journal of Entrepreneurship & Organization Management, 6(1), 1-7.

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.

Mollah, S., & Zaman, M. (2015). Shari'ah supervision, corporate Governance and performance:Conventional vs. Islamic banks. Journal of Banking & Finance, 58, 418–435.

Musibah, A. S., & Alfattani, W. S. B. W. Y. (2014). The mediating effect of financial performance on the relationship between Shariah supervisory board effectiveness, intellectual capital and corporate social responsibility, of Islamic banks in Gulf Cooperation Council countries. Asian Social Science, 10(17), 139.

Nathan, S. (2010). The Performance of Shari’a Supervisory Boards Within Islamic Financial Institutions in The Gulf Cooperation Council Countries. Virtusinter Press, 8(1), 247-266.

Olivares-Polanco, F. (2005). Commercializing microfinance and deepening outreach? Empirical evidence from Latin America. Journal of Microfinance/ESR Review, 7(2), 47-69.

Pathan, S. (2009). Strong boards, CEO power and bank risk-taking. Journal of Banking & Finance, 33, 1340–1350.

Pindado, J., & Requejo, I. (2014). Panel data: A methodology for model specification and testing. In K. Paudyal, & C. L. Cooper (Eds.), Wiley encyclopedia of management (pp. 1–8) (3rd ed.). Location: Publisher.

Rammal, H. G. (2006). The importance of Shari’ah supervision in Islamic financial institutions. Corporate Ownership and Control, 3(3), 204-208.

Ramzan, M., & Zafar, M. I. (2014). Liquidity risk management in Islamic banks: a study of Islamic banks of Pakistan. Interdisciplinary journal of contemporary research in business, 5(12), 199-215.

Roodman, D. (2006). How to do xtabond2: An introduction to difference and system GMM in Stata. Center for Global Development, Working Paper No. 103.

Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The stata journal, 9(1), 86-136.

Rao, S., & Dula, T. (2017). Corporate Governance, diversification, and risk management in commercial banks of Ethiopia. International Journal of Commerce and Management Research, 3(2), 85-90.

S&P. (2007). Microfinance: Taking Root In The Global Capital Markets. Retrieved from New York:

Saunders, A., & Cornett, M. M. (2007). Financial Markets and Institutions: An Introduction to the Risk Management Approach, 2007, McGraw-Hill, Boston.

Sutrisno. (2016). Risk, Efficiency And Performance of Islamic Banking: Empirical Study on Islamic Bank in Indonesia. Asian Journal of Economic Modelling, 4(1), 47-56.

Vazquez, F., & Federico, P. (2015). Bank funding structures and risk: Evidence from the global financial crisis. Journal of banking & finance, 61, 1-14.

Wintoki, M., Linck, J., & Netter, J. (2012). Endogeneity and the dynamics of corporate Governance. J Financ Econ, 105, 581–606.

Wooldridge. (2002). Econometric Analysis of Cross-Section and Panel Data. MIT Press, Cambridge, Massachusetts, London.
How to Cite
Islam, M. M., Bhuiyan, A. B., Kassim, A. A. M., & Rasli, S. (2021). THE EFFECTS OF SHARIAH SUPERVISORY BOARD CHARACTERISTICS AND THE RISK-TAKING AMONG ISLAMIC FINANCING INSTITUTIONS IN BANGLADESH. International Journal of Shari’ah and Corporate Governance Research, 4(1), 28-35.
Original Articles/Review Articles/Case Reports/Short Communications