The Cost Effectiveness, Performance & Shar¯ı‘ah Supervisory Board Attributes in Islamic Banks

Abstract

Purpose: This study emphasis on cost, which is the most essential form of efficiency that can be attained when a company identifies inputs that allow it to get the required results at the lowest possible cost. This study concentrates only on the Islamic banking sector in Pakistan and aims to observe the impact of cost efficiency on Islamic banks performance with moderating role of Shar¯ı‘ah Supervisory Board (SSB) attributes such as size, qualification, cross membership, expertise and annual change in composition.
Methodology: The study uses data envelopment analysis technique to measure the cost efficiency of Islamic banks. The data has been collected through 13 Islamic banks’ annual reports over the period of 2005 to 2018. Bank performance has been measured using two indicators: return on asset, return on equity, & the panel data regression analysis is
employed.
Findings: The study reports a significant positive association among the
cost efficiency & Islamic banks performance. Additionally, the study
also establishes that SSB attributes such as size of board, qualification,
expertise, and cross membership, annual change in composition moderates
the significant association among cost efficiency & Islamic banks
performance in Pakistan.
Significance: This study has useful implications for managers and
investors operating in international settings. In addition, they will act as
a source of information for policymakers and the top management of
Islamic banking sector. Academic researchers engaged in Islamic banking
might get insight from this study by better understanding the importance
of efficiency-enhancing components.
KAUJIE Classification: M10, P51
JEL Classification: G24, G31