Presenters: Meilinda Ferniawati, Dita Andraeny
Affiliation: UIN Raden Mas Said Surakarta
Room: 10
ICIES News- At the 4th International Conference on Islamic Economics Studies (ICIES) 2024, Meilinda Ferniawati and Dita Andraeny from UIN Raden Mas Said Surakarta presented their study titled “Financial Stability in Islamic Banks: Does Corporate Governance Matter?” The session, held in Room 10, explored the impact of various corporate governance elements on the financial stability of Islamic banks in Indonesia.
The study aimed to assess how different aspects of corporate governance influence the financial stability of Islamic banks. Key corporate governance proxies examined included the Sharia Supervisory Board, the Board of Directors, Independent Board of Commissioners, Board of Commissioners, and the Audit Committee Size. The research focused on Islamic commercial banks registered with the Financial Services Authority (OJK), using secondary data from annual financial statements between 2018 and 2022.
The study utilized panel data regression analysis with a purposive sample of 11 Islamic commercial banks. The findings highlighted the following:
- Audit Committee: The Audit Committee was found to have a positive and significant effect on the financial stability of Islamic banks, suggesting that a well-structured and active audit committee contributes to stronger financial stability.
- Sharia Supervisory Board and Board of Directors: Both the Sharia Supervisory Board and the Board of Directors were found to have a negative and significant effect on financial stability. This indicates that their roles or actions might not align with enhancing financial stability in the current context.
- Independent Board of Commissioners and Board of Commissioners: These governance elements did not show a significant impact on the financial stability of Islamic banks.
Ferniawati and Andraeny’s research underscores the nuanced role of corporate governance in ensuring the financial stability of Islamic banks. Their findings suggest that while some governance structures like the Audit Committee positively influence stability, others might need reevaluation to better align with stability objectives.
The presentation provided valuable insights for policymakers and banking regulators, emphasizing the need for ongoing assessment and optimization of governance practices to enhance the financial stability of Islamic banks. The study contributes to the broader understanding of corporate governance’s role in the financial sector, offering practical implications for strengthening governance frameworks in Islamic banking.