Staff View: Corporate governance of Islamic financial institutions in Malaysia

Corporate governance of Islamic financial institutions in Malaysia

Given the phenomenal increase in Islamic banking activities globally, it is important that there exists good governance practices of Islamic financial institutions (IFIs). This is primarily to ensure its sustainability in the long run. More importantly, in order for Islamic banks to play an optimum...

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Main Authors:	Sulaiman, Maliah, Abd Majid, Norakma, Mohd Ariffin, Noraini
Format:	Article
Language:	English English
Published:	University of Malaya 2015
Subjects:	H Social Sciences (General)
Online Access:	http://irep.iium.edu.my/43688/1/Corporate_Governance_of_Islamic_Financial.pdf http://irep.iium.edu.my/43688/4/43688_Corporate%20governance%20of%20Islamic%20financial_SCOPUS.pdf http://irep.iium.edu.my/43688/ http://ajba.um.edu.my/
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spelling	my.iium.irep.436882018-05-22T03:54:40Z http://irep.iium.edu.my/43688/ Corporate governance of Islamic financial institutions in Malaysia Sulaiman, Maliah Abd Majid, Norakma Mohd Ariffin, Noraini H Social Sciences (General) Given the phenomenal increase in Islamic banking activities globally, it is important that there exists good governance practices of Islamic financial institutions (IFIs). This is primarily to ensure its sustainability in the long run. More importantly, in order for Islamic banks to play an optimum role in the development of Islamic countries, it is imperative to develop regulatory structures which can help to control fraud, exploitation, and un-Islamic behaviour in banking practices. Additionally, the development of strong governance practices will win public confidence, thereby promoting trust amongst equity holders, investors and other parties dealing with these IFIs. However, promulgating and developing standards and guidelines on corporate governance (CG) may not be adequate. Thus, this paper examines the extent IFIs are adhering to such guidelines. There are two stages to this study. First a disclosure index was developed using the guidelines issued by the Central Bank of Malaysia (BNM), the standard on CG promulgated by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) and the framework introduced by the Islamic Financial Services Board (IFSB). The index developed in the first stage was then used to assess the annual reports of all the 16 IFIs operating in Malaysia. It was found that on a scale of 0 to 100, the CG disclosure index ranges from a low of 42.28 to a high of 68.29, with the average score of 51.42. This shows that IFIs are not particularly motivated to disclose specific-governance related information. On the basis of the stewardship theory, however, these elements reflect the accountability of IFIs towards their stakeholders. Keywords: Corporate Governance Disclosure Quality, Islamic Financial Institutions (IFIs), Malaysia University of Malaya 2015 Article REM application/pdf en http://irep.iium.edu.my/43688/1/Corporate_Governance_of_Islamic_Financial.pdf application/pdf en http://irep.iium.edu.my/43688/4/43688_Corporate%20governance%20of%20Islamic%20financial_SCOPUS.pdf Sulaiman, Maliah and Abd Majid, Norakma and Mohd Ariffin, Noraini (2015) Corporate governance of Islamic financial institutions in Malaysia. Asian Journal of Business and Accounting, 8 (1). pp. 65-93. ISSN 1985-4064 http://ajba.um.edu.my/
institution	Universiti Islam Antarabangsa Malaysia
building	IIUM Library
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	International Islamic University Malaysia
content_source	IIUM Repository (IREP)
url_provider	http://irep.iium.edu.my/
language	English English
topic	H Social Sciences (General)
spellingShingle	H Social Sciences (General) Sulaiman, Maliah Abd Majid, Norakma Mohd Ariffin, Noraini Corporate governance of Islamic financial institutions in Malaysia
description	Given the phenomenal increase in Islamic banking activities globally, it is important that there exists good governance practices of Islamic financial institutions (IFIs). This is primarily to ensure its sustainability in the long run. More importantly, in order for Islamic banks to play an optimum role in the development of Islamic countries, it is imperative to develop regulatory structures which can help to control fraud, exploitation, and un-Islamic behaviour in banking practices. Additionally, the development of strong governance practices will win public confidence, thereby promoting trust amongst equity holders, investors and other parties dealing with these IFIs. However, promulgating and developing standards and guidelines on corporate governance (CG) may not be adequate. Thus, this paper examines the extent IFIs are adhering to such guidelines. There are two stages to this study. First a disclosure index was developed using the guidelines issued by the Central Bank of Malaysia (BNM), the standard on CG promulgated by the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) and the framework introduced by the Islamic Financial Services Board (IFSB). The index developed in the first stage was then used to assess the annual reports of all the 16 IFIs operating in Malaysia. It was found that on a scale of 0 to 100, the CG disclosure index ranges from a low of 42.28 to a high of 68.29, with the average score of 51.42. This shows that IFIs are not particularly motivated to disclose specific-governance related information. On the basis of the stewardship theory, however, these elements reflect the accountability of IFIs towards their stakeholders. Keywords: Corporate Governance Disclosure Quality, Islamic Financial Institutions (IFIs), Malaysia
format	Article
author	Sulaiman, Maliah Abd Majid, Norakma Mohd Ariffin, Noraini
author_facet	Sulaiman, Maliah Abd Majid, Norakma Mohd Ariffin, Noraini
author_sort	Sulaiman, Maliah
title	Corporate governance of Islamic financial institutions in Malaysia
title_short	Corporate governance of Islamic financial institutions in Malaysia
title_full	Corporate governance of Islamic financial institutions in Malaysia
title_fullStr	Corporate governance of Islamic financial institutions in Malaysia
title_full_unstemmed	Corporate governance of Islamic financial institutions in Malaysia
title_sort	corporate governance of islamic financial institutions in malaysia
publisher	University of Malaya
publishDate	2015
url	http://irep.iium.edu.my/43688/1/Corporate_Governance_of_Islamic_Financial.pdf http://irep.iium.edu.my/43688/4/43688_Corporate%20governance%20of%20Islamic%20financial_SCOPUS.pdf http://irep.iium.edu.my/43688/ http://ajba.um.edu.my/
_version_	1643612432115957760
score	13.211869

Corporate governance of Islamic financial institutions in Malaysia

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