Do board characteristics affect the financial soundness of Islamic banks
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Abstract
This paper was conducted to analyze the impact of the Board of Directors’ characteristics on
the financial soundness of Islamic banking, using panel data regression. Composed of 67
Islamic banks over 2015-2018 period. The level of Islamic bank soundness is individually
employing the Z-score measure Overall, the results of this study indicate that the soundness of
Islamic banks is not adversely affected by the appointment of the independent non-executive
director and the institutional director. However, the foreign director and the femal director have
a positive impact on the financial soundness of banks. While, the Board of Directors’ size does
not have any significant effect on the financial soundness of Islamic banks. With this study, we
hope to provide new insights to the literature review andidentify the relationship between the
Board of Directors and the financial soundness of Islamic banking. It has been recommended
to increase the level of female presence and the foreignon the Board of Directors of Islamic
banks.
Keywords
Board of Directors, Corporate Governance, Financial soundness, Gender diversity, Islamic Banking, Shariah compliance.
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