Corporate Governance and IFSB Standard-4: Evidence from Islamic Banks in Bangladesh

Md. Harun Ur Rashid, Ruma Khanam, Hafij Ullah

Research output: Contribution to journalArticlepeer-review

Abstract

Purpose – This paper aims to examine the compliance status of Islamic banks in Bangladesh with Shari'ah-based accounting standards named Islamic Financial Services Board (IFSB) standard-4 and its association with corporate governance.

Design/methodology/approach – The six years of secondary data, including the annual reports of 2013-2018, were collected from the websites of all the seven listed Islamic banks, i.e., 100% of the population available during the period of study. The study employed a content analysis approach for systematically categorizing and analyzing the contents disclosed in the annual report. A total compliance score (TCS) based on 133 reporting items of IFSB standard-4 were
considered for content analysis. Furthermore, the study applied the ordinary least square (OLS) to investigate the impact of corporate governance on IFSB standard-4.

Findings– The study found that the level of compliance with the IFSB standard by the Islamic banks in Bangladesh is poor, as the overall compliance status is 44.83 percent. Further, the study observed a significant and positive influence of the Shari'ah supervisory committee, the board size, accounting experts on the board, foreign ownership, and institutional ownership on the level of compliance with IFSB standard-4. On the other hand, the study found a negative effect of directors' ownership on the level of compliance with IFSB standard-4.

Practical implications- The study provides the management of Islamic banks an insight into developing their governance characteristics to comply with Islamic accounting and reporting standards. Moreover, the study expects to facilitate the management of Islamic banks in designing their accounting and reporting outlines to enhance the level of compliance with the IFSB standards.

Originality/value: This pioneering study on IFSB standards opens an avenue to the researchers exploring the accounting and reporting status of Islamic banks considering the requirements of the IFSB standard.
Original languageEnglish
Pages (from-to)(In-Press)
JournalInternational Journal of Islamic and Middle Eastern Finance and Management
Volume(In-Press)
DOIs
Publication statusAccepted/In press - 22 Apr 2021

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