Accounting background and cross-membership effects on investment efficiency in Islamic banks: a study of Islamic Supervisory Board members
Journal of Financial Reporting and Accounting
ISSN: 1985-2517
Article publication date: 16 April 2024
Abstract
Purpose
This study aims to examine the joint effect of accounting background and cross-membership of Islamic Supervisory Board (ISB) members on bank investment efficiency.
Design/methodology/approach
This study uses data collected from 36 Islamic banks across 15 countries globally, spanning the period from 2012 to 2021. This research uses an ordinary least squares regression and a comprehensive set of endogeneity and robustness tests.
Findings
The findings show a negative relationship between the accounting background of ISB members and investment efficiency. However, when ISB members with accounting backgrounds also have ISB cross-memberships, the banks exhibit high investment efficiency. These results suggest that ISB cross-membership plays a crucial role in facilitating Islamic banks’ access to timely information on investment opportunities. This enables ISB members with accounting expertise to thoroughly assess the benefits and risks associated with their investment prospects. These findings imply that ISB members with accounting backgrounds and cross-memberships have greater motivation and thoughtful considerations for making better investment decisions. Consequently, Islamic banks are better positioned to undertake high profitable investment projects, which enhance their investment efficiency.
Practical implications
The current study holds immense value for Islamic bank management in their selection of ISB members who possess an accounting background and cross-membership.
Originality/value
This study delves into a comprehensive investigation of the proficiency, underlying principles and unique characteristics exhibited by ISB members with an accounting background. Moreover, this study acknowledges the burgeoning global prominence of Islamic banks.
Keywords
Acknowledgements
The authors of the paper would like to thankful for Editor in Chief: Professor Aziz Jaafar, Associate Editor: Professor Hafez Abdo, and all anonymous reviewers for constructive comments and suggestion regarding this paper, so this paper may publishable on the Journal of Financial Reporting and Accounting.
Funding: This research was fully funded by Lembaga Penelitian dan Pengabdian Masyarakat, Universitas Airlangga on the International Research Collaboration (IRC) Top 300 research scheme 2023.
Statement of Conflict of interest: The authors declare no conflict of interest regarding this paper.
Citation
Permatasari, Y., Cahyono, S., Rizki, A., Fitriani, N. and Kamarudin, K.A. (2024), "Accounting background and cross-membership effects on investment efficiency in Islamic banks: a study of Islamic Supervisory Board members", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-07-2023-0429
Publisher
:Emerald Publishing Limited
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