Audit committee attributes and Islamic bank risk-taking behavior

Abstract

Purpose

This study aims to investigate the relationship between audit committee (AC) attributes and the risk-taking behavior of Islamic banks.

Design/methodology/approach

The study used data generated from the annual reports of 43 full-fledged Islamic banks operating in 15 countries between 2010 and 2020.

Findings

The findings indicate that AC size, AC independence and the proportion of AC members from foreign countries have a significant negative relationship with the risk-taking of Islamic banks. However, AC meetings, AC gender diversity and the proportion of AC members with doctorate degrees have insignificantly influenced the risk-taking of Islamic banks.

Research limitations/implications

The study used only six AC attributes out of corporate governance mechanisms likely to affect the insolvency risk of full-fledged Islamic banks between 2010 and 2020.

Practical implications

The study sheds light on the effects of AC attributes on the risk-taking of Islamic banks. The findings could allow policymakers and regulators to provide policies and regulations that could improve AC’s oversight role in constraining Islamic banks from excessive risk-taking. Besides, this study can guide the board of directors in appointing AC members who can prevent Islamic banks from taking excessive risks.

Originality/value

This study provides clear and adequate empirical evidence showing how key audit committee attributes influence the risk-taking behavior of full-fledged Islamic banks.

Citation

Umar, U.H., Abduh, M. and Besar, M.H.A. (2023), "Audit committee attributes and Islamic bank risk-taking behavior", Journal of Islamic Accounting and Business Research, Vol. 14 No. 6, pp. 868-886. https://doi.org/10.1108/JIABR-09-2022-0244