Memed Sueb

A dearth of studies linking risk-taking with maqasid shariah-based performance has been the motivation for analyzing this relationship. This study also examines the moderating effect of shariah governance. The study uses time-series data with the dynamic panel technique to examine the relationship between variables. The number of samples in this study was 75 Islamic banks operating non-window banking from 19 countries. Results prove that risk-taking has a significant adverse effect on the performance of Islamic banks. Lower risk-taking indicates a bank is more efficient, resulting in higher maqashid shariah-based performance. The governance has a positive moderating effect on the relationship between risk-taking and the performance of Islamic banks. Increasingly quality SSB strengthens the risk-taking relationship with maqashid shariah-based performance. This study implies that Islamic banks with quality SSB will be more efficient in managing risk to increase performance that complies with maqashid shariah criteria in the long term. This study concludes that managers must improve risk management in the distribution of funds so that Islamic banks are more efficient. Furthermore, policy-making authorities in each country must support the policy on the existence of SSB and the composition of the background so that it is of higher quality.

Shariah supervisory boards are a key feature of shariah governance (SG), providing additional monitoring and oversight. A suitable SG mechanism enhances risk mitigation and improves Islamic bank (IB) performance without violating shariah principles. This study examines the impact of the shariah supervisory board (SSB), maqasid shariah, and risk-taking on Islamic bank performance globally. Quantitative research design with a Dynamic panel regression approach is used with a two-step generalized method of moments (GMM) with data from the Bankscope database for 2014–2018. The findings of this study show that characteristics of SSB and risk-taking have a significant impact on IB performance. This study proves that higher SSB characteristics in terms of size, expertise, level of education, cross-membership and reputation encourage the better performance of Islamic banks. Higher risk-taking illustrates that Islamic banks are more efficient, resulting in better financial performance. Compliance with maqasid sharia indicates that sharia banks comply with Islamic laws so that the resulting performance meets financial aspects and sharia principles. SSB functions as a monitor for Islamic banks so that they operate according to sharia principles, which are reflected in the maqasid sharia elements. Therefore, a higher quality SSB and a higher maqasid shariah index score positively affect the financial performance of IBs.