Executives’ commitment, corporate governance, and performance of Islamic banks: Evidence from the Saudi context
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DOIhttp://dx.doi.org/10.21511/bbs.17(2).2022.08
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Article InfoVolume 17 2022, Issue #2, pp. 86-97
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This paper aims to investigate the impact of executives’ ethical commitment and corporate governance on the Islamic banks’ performance in the Saudi context. The sample of this study consists of Saudi Islamic banks over the period 2012–2020. The financial data were extracted from the Saudi stock exchange (Tadawul). While the behavioral data, particularly the executives’ ethical commitment, is measured through the ethical commitment index. In the econometric analysis, a generalized least square regression method (GLS) is applied to two different sub-models with different dependent variables (return on assets and return on equity). Empirical results suggest that board size and board independence have a significant impact on bank performance. The ethical commitment of executives contributes positively and significantly to the performance of Islamic banks in terms of return on assets. However, there is no statistical evidence of the effect of ethical commitment on Islamic banks’ returns on equity. Therefore, boards of directors of Islamic banks should include expert independent directors to promote best governance practices and enhance executives’ commitment. Larger boards can improve their credit ratings and access to resources.
Acknowledgment
This study was funded by Deanship of Scientific Research at Princess Nourah bint Abdulrahman University (Grant No. 39/S/243).
- Keywords
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JEL Classification (Paper profile tab)C23, G21, G30, G41
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References58
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Tables9
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Figures0
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- Table 1. Data summation
- Table 2. Frequency analysis of EC items
- Table 3. Descriptive statistics
- Table 4. Pearson correlation matrix
- Table 5. Multicollinearity test
- Table 6. Breusch-Pagan test
- Table 7. Test of individual effects
- Table 8. Hausman test
- Table 9. Multiple regression (GLS)
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