BOARD CHARACTERISTICS, GOOD CORPORATE GOVERNANCE AND MAQASHID PERFORMANCE IN ISLAMIC BANKING

Abstract

This research aims to examine the effect of board characteristics on the Maqâshid Shariah Index (MSI) of the performance of Indonesian Islamic banks, using panel data regression. Independent variables, namely the characteristics of the board of commissioners, board of directors, and Shariah supervisory board, are related to board internal ownership, board expertise, board independence, cross-membership of boards, and board tenure, with size and growth as controlling variables, while the dependent variable is maqâshid shariah performance in Islamic banks. The study samples include 12 Islamic banks in Indonesia which regularly published their annual reports and management over the period 2009 to 2017. The results from both models, with and without control variables, show that board ownership (commissioner and director), board cross-membership (commissioner and Shariah supervisor) and Shariah supervisor expertise do not have an impact on the MSI. Moreover, the results from the model without control variables show that commissioner expertise has a positive impact on the MSI, while board tenure (commissioner and director) and commissioner independence have a negative impact on the index. These results provide recommendations for the Islamic banking industry, so that it can be applied optimally to achieve the main objectives of the maqâshid Shari’ah.