Impacts of Sharīʿah supervision and corporate social responsibility on banks’ risk-taking behavior and profitability
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 7 December 2021
Issue publication date: 3 August 2022
Abstract
Purpose
This paper aims to examine the impacts of both Sharīʿah supervision and corporate social responsibility on banks’ risk-taking behavior and profitability. The analysis empirically uses dynamic and balanced panel data from 12 banks of Bangladesh for 2010–2019.
Design/methodology/approach
Dynamic panel generalized method of moments has been used primarily to examine the effects of Sharīʿah supervision and corporate social responsibility on risk-taking behavior and profitability. Later, the authors validate the core results using three-stage least squares and incorporates alternative risk and profitability measures in the baseline equation.
Findings
This study finds that Sharīʿah supervision heterogeneously derives benefits for Islamic banks and Islamic windows. Though there is no significant impact of female diversity on risk relying on board diversification, the bank can strengthen profitability. On the one hand, the annual changes in board composition reduce (increase) risk (financial and stability efficiency) but compromise profitability. Notably, socially responsible banks have been characterized as risk-averse and better stabilized (in terms of solvency and efficiency), more efficient and profitable.
Originality/value
Very few studies are available in the current literature which examine the impacts of Sharīʿah supervision and corporate social responsibility on either bank performance or risk-taking in the developing economy’s context.
Keywords
Citation
Moudud-Ul-Huq, S. (2022), "Impacts of Sharīʿah supervision and corporate social responsibility on banks’ risk-taking behavior and profitability", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 15 No. 4, pp. 811-828. https://doi.org/10.1108/IMEFM-03-2020-0126
Publisher
:Emerald Publishing Limited
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