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Publication date: 24 May 2024

Hasan Mukhibad, Doddy Setiawan, Y. Anni Aryani and Falikhatun Falikhatun

Literature on the board diversity of Islamic banks (IB) found limited knowledge of the “deep-level” attribute. This study aims to explain the impact of the board diversity…

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Abstract

Purpose

Literature on the board diversity of Islamic banks (IB) found limited knowledge of the “deep-level” attribute. This study aims to explain the impact of the board diversity attributes (education levels, educational backgrounds and the interactions between these two attributes of diversity) on profitability.

Design/methodology/approach

The research sample is 37 fully flagged IBs from five Southeast Asian countries, covering nine years (2010–2019). Data were analyzed using the two-step system generalized moment (2SYS-GMM) method.

Findings

We found that the cognitive conflict between the board of directors (BOD) and the Shariah Supervisory Board (SSB), which has heterogeneity in its education level and educational background, positively affects profitability. These results reinforce the resources dependence theory (RDT) approach that having boards with heterogeneous characteristics is beneficial for IB.

Practical implications

The findings of this study would offer useful information for Islamic banking authorities to revise or formulate rules and guidelines and make a greater effort to implement corporate governance (CG) reform measures by determining educational level and background as a requirement to become a member of a BOD or an SSB.

Originality/value

This paper contributes in three ways: (1) we use the “deep-level” diversity attributes of the BOD and the SSB, (2) it focuses on cognitive conflict in boards by presenting the expertise diversity of the BOD and SSB and (3) we interact with the level of education to evaluate the effect of a cognitive conflict.

Details

Asian Journal of Accounting Research, vol. 9 no. 3
Type: Research Article
ISSN: 2443-4175

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