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This study aims to investigate the impact of the accounting and auditing organisation for Islamic financial institution (AAOIFI) governance disclosure on the performance of Islamic banks (IBs).

The ordinary least squares regression model was used to test the impact of AAOIFI governance disclosure on the performance of 126 IBs from 8 countries that mandatorily adopt the AAOIFI standards for three years (2013–2015). In this regression model, return on asset (ROA) and return on equity (ROE) are the dependent variables, while AAOIFI governance disclosure is the independent variable. Corporate governance mechanisms, firm characteristics, year dummy and country dummy are used as control variables.

This paper found an insignificant relationship between AAOIFI governance disclosure and IBs performance.

This study highlighted the implication that the current research may help IBs and encourage them to disclose more information in annual reports, especially those related to AAOIFI governance standards because following good corporate governance leads to good financial performance. The major limitation of the paper is that it is only focussed on two measurements of bank performance – ROA and ROE; it would be good to use other firm performance measures, such as profit margin.

This study provides new empirical evidence on the impact of AAOIFI governance disclosure on IBs performance.

The purpose of this study is to investigate the influence of corporate governance mechanisms on Accounting and Auditing Organization for Islamic Financial Institution (AAOIFI) governance disclosure in Islamic Banks.

To test the research hypotheses, the authors created a comprehensive AAOIFI governance disclosure index and used regression analysis for a sample of Islamic banks for the financial years within the period 2013-2015.

The authors found that audit committee size is the main determinant of the AAOIFI governance disclosure.

This study has a number of limitations that could be taken as avenues for a future study such as, the study used the six variables of CG and the four variables of firm characteristics, based on available data. This research is limited to just Islamic banks.

The research contributes to Islamic accounting literature by identifying the driver for the AAOIFI governance disclosure for Islamic banks that mandatorily adopt AAOIFI standards.