This study investigates the impact of corporate governance structure on Islamic banking performance, focusing on four key dimensions: board size, Shariah governance, board independence, and ownership structure. The study utilized a quantitative methodology that involved collecting survey data through questionnaires, and the subsequent analysis was carried out using SmartPLS4, a partial least squares structural equation modeling (PLS-SEM) software. The results of the measurement model confirmed reliability and validity throughout every construct examined. Meanwhile, the structural model showed sufficient explanatory power and satisfactory predictive relevance. Hypothesis testing revealed that governance structures play a significant role in shaping the financial aspects of Islamic banking performance. This study's findings present empirical evidence reinforcing the significance of strong governance in promoting the sustainability and the competitive edge of Islamic banking, primarily as it operates within Indonesia. This study makes a valuable contribution to the existing body of knowledge on Islamic finance by focusing on key governance elements that drive improved performance, while also providing helpful information that regulators and policymakers can utilize to strengthen the governance structure within the Islamic banking industry.
Akbar, M., Hussain, S., Ahmad, T., & Hassan, S. (2020). Corporate Governance and Firm Performance in Pakistan; Dynamic Panel Estimation. Abasyn Journal of Social Sciences, 12(2), 213-230.
Alam, M. K., & Miah, M. S. (2021). Independence and effectiveness of Shariah supervisory board of Islamic banks: evidence from an emerging economy. Asian Review of Accounting, 29(2), 173-191. doi:10.1108/ARA-01-2020-0005
Alam, M. K., Rahman, M. M., Islam, F. T., Adedeji, B. S., Mannan, M. A., & Sahabuddin, M. (2021). The practices of Shariah governance systems of Islamic banks in Bangladesh. Pacific Accounting Review, 33(4), 505-524. doi:10.1108/PAR-10-2020-0195
Alipour, M., Ghanbari, M., Jamshidinavid, B., & Taherabadi, A. (2019). Does board independence moderate the relationship between environmental disclosure quality and performance? Evidence from static and dynamic panel data. Corporate Governance The International Journal of Business in Society, 19(3), 580-610. doi:10.1108/CG-06-2018-0196
Alkurdi, A., hamad, A., Thneibat, H., & Elmarzouky, M. (2021). Ownership structure's effect on financial performance: An empirical analysis of Jordanian listed firms. Cogent Business & Management, 8(1), 1939930. doi:10.1080/23311975.2021.1939930
Buallay, A. (2019). Corporate governance, Shari'ah governance and performance: A cross-country comparison in MENA region. International Journal of Islamic and Middle Eastern Finance and Management, 12(2), 216-235. doi:10.1108/IMEFM-07-2017-0172
Chronopoulos, D. K., Yilmaz, M. H., & Wilson, J. O. (2023). Stakeholder Orientation and Bank Payout Policy: Evidence from US Constituency Statute. British Journal of Management, 3, 1440-1458. doi:10.1111/1467-8551.12640
Fatmawati, D., Ariffin, N. M., Abidin, N. H., & Osman, A. Z. (2022). Shariah governance in Islamic banks: Practices, practitioners and praxis. Global Finance Journal, 51, 100555. doi:10.1016/j.gfj.2020.100555.
Habtoor, O. S., Alowaimer, O. H., Waked, S. S., & Alobaid, R. O. (2024). The moderating effect of independent board members’ ownership on the relationship between their independence and firm performance. Cogent Business & Management, 11(1). doi:10.1080/23311975.2024.2399309
Hair Jr, J. F., Hult, G. T. M., Ringle, C. M., Sarstedt, M., Danks, N. P., & Ray, S. (2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) using R: A workbook (p. 197). Springer Nature. doi:10.1007/978-3-030-80519-7
Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24. doi:10.1108/EBR-11-2018-0203
Hair, J., & Alamer, A. (2022). Partial least squares structural equation modeling (PLS-SEM) in second language and education research: Guidelines using an applied example. Research Methods in Applied Linguistics, 1(3), 100027. doi:10.1016/j.rmal.2022.100027
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115-135. doi:10.1007/s11747-014-0403-8
IFSB. (2009). Guiding Principles on Shari'ah Governance Systems for Institutions Offering Islamic Financial Services. Islamic Financial Services Board (IFSB). Kuala Lumpur: Islamic Financial Services Board. https://www.ifsb.org/wp-content/uploads/2023/10/IFSB-10-December-2009_En.pdf
Jan, A. A., Lai, F.W., Draz, M. U., Tahir, M., Ali, S. E. A., Zahid, M., & Shad, M. K. (2022). Integrating sustainability practices into islamic corporate governance for sustainable firm performance: from the lens of agency and stakeholder theories. Qual Quant, 56(5), 2989-3012. doi:10.1007/s11135-021-01261-0
Jensen, M. C., & Meckling, W. H. (2000). Theory of The Firm: Managerial Behavior, Agency Costs and Ownership Structure. In R. I. Tricker (Ed.), Corporate Governance (1st ed., p. 56). Gower. doi:10.4324/9781315191157-9
Karbhari, Y., Benamraoui, A., & Hassan, A. F. S. (2024). Sharia boards, managerial strategies and governance practices in Islamic banks: a Goffmanesque discourse. Accounting, Auditing & Accountability Journal, 37(4), 1069-1095. doi:10.1108/AAAJ-07-2017-3037
Khalil, A., & Slimene, I. B. (2021). Financial soundness of Islamic banks: does the structure of the board of directors matter? Corporate Governance, 21 (7), 1393-1415. doi:10.1108/CG-06-2020-0237
Kirimi, P. N., Kariuki, S. N., & Ocharo, K. N. (2022). Ownership structure and financial performance: Evidence from Kenyan commercial banks. PloS one, 17(5), e0268301. doi:10.1371/journal.pone.0268301
Mai, M. U., Syarief, M. E., Setiawan, I., Burhany, D. I., Ruhana, N., Amin, H., & Jamaluddin, M. R. (2024). Indonesian mining companies’ social responsibility performance: the role of ownership structure and sharia compliance. Accounting, Corporate Governance & Business Ethics, 11(1), 2396738. doi:10.1080/23311975.2024.2396738
Malik, M. S., Irfan, M., & Munir, S. (2025). Corporate tax avoidance and firm performance: the moderating role of ownership concentration and board independence. Cogent Business & Management, 12(1). doi:10.1080/23311975.2024.2448277
Menicucci, E., & Paolucci, G. (2022). Board Diversity and ESG Performance: Evidence from the Italian Banking Sector. Sustainability, 14(20). doi:10.3390/su142013447
Mihajat, M. I. (2019). Shari’ah Governance Framework in Islamic Banking and Financial Institutions in Indonesia: A Proposed Structure. In T. Azid, A. A. Alnodel, & M. A. Qureshi, Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice (pp. 239-248). Emerald Publishing Limited. doi:10.1108/978-1-78973-007-420191021
Nainggolan, Y. A., Prahmila, D. I., & Syaputri, A. R. (2023). Do board characteristics affect bank risk-taking and performance? Evidence from Indonesian and Malaysian Islamic banks. Journal of Management and Governance, 27, 1115-1145. doi:10.1007/s10997-022-09625-w
Nwude, E. C., Zakirai, M. S., & Nwude, C. A. (2023). Ownership Structure and Bank Performance in Emerging Market Economy: Evidence From Nigerian Listed Deposit Money Banks. SAGE Open, 13(4). doi:10.1177/21582440231219382
OJK. (2024). Indonesian Islamic Financial Development Report 2023. Indonesia Financial Services Authority (OJK), Department of Islamic Banking. Otoritas Jasa keuangan (OJK). https://www.ojk.go.id/en/berita-dan-kegiatan/info-terkini/Documents/Pages/Indonesian-Islamic-Financial-Development-Report-LPKSI-2023/Indonesian%20Islamic%20Financial%20Development%20Report%202023_.pdf
Ramly, Z., & Nordin, N. D. (2018). Sharia Supervision Board, Board Independence, Risk Committee and Risk-taking of Islamic Banks in Malaysia. International Journal of Economics and Financial Issues, 8(4), 290-300.
Rosmanidar, E., Hadi, A. A., & Ahsan, M. (2021). Islamic Banking Performance Measurement: A Conceptual Review of Two Decades. International Journal of Islamic Banking and Finance Research, 5, 16-33. doi:10.46281/IJIBFR.V5I1.1056.
Saba, I. (2019). Shari’ah Governance Framework in Different Jurisdictions. In T. Azid, A. Alnodel, & M. Qureshi, Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice (pp. 201-208). Emerald Publishing Limited, Leeds. doi:10.1108/978-1-78973-007-420191017
Saghi, N., Srour, Z., Viviani, J.-L., & Jezzini, M. (2023). Systemic risk in European banks: Does ownership structure matter? The Quarterly Review of Economics and Finance, 92, 88-111. doi:10.1016/j.qref.2023.07.009
Tampakoudis, I., Nerantzidis, M., Artikis, P., & Kiosses, N. (2022). The effect of board size on shareholder value: Evidence from bank mergers and acquisitions. European Management Journal, 40(6), 883-894. doi:10.1016/j.emj.2022.09.002
Utama, C. A., Utama, S., & Amarullah, F. (2017). Corporate governance and ownership structure: Indonesia evidence. Corporate Governance, 17 (2), 165-191. doi:10.1108/CG-12-2015-0171
Vallelado, E., & García-Olalla, M. (2022). Bank board changes in size and composition: Do they matter for investors? Corporate Governance: An International Review, 30(2), 161-188. doi:10.1111/corg.12397
Zahoor, A. (2024). Islamic banking adoption: invoking the congruity paradigm. Journal of Islamic Marketing, 15(12), 3409-3424. doi:10.1108/JIMA-08-2023-0253
Akhyar, A. M., & Hussin, N. (2025). Governance Structures as Drivers of Performance in Islamic Banks. International Journal of Academic Research in Business and Social Sciences, 15(9), 1419–1432.
Copyright: © 2025 The Author(s)
Published by Knowledge Words Publications (www.kwpublications.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
