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Corporate governance and liquidity creation nexus in Islamic banks—Is managerial ability a channel?

journal contribution
posted on 15.02.2021, 22:17 by Md Safiullah, M Kabir Hassan, Md Nurul Kabir
© 2020 Elsevier Inc. We examine the effect of dual board governance mechanisms (Shariah supervisory board and regular board of directors) on Islamic banks' liquidity creation. We also investigate whether managerial ability is a channel through which such governance mechanisms influence liquidity creation. Using data for 110 Islamic and conventional banks from 11 countries for the period of 2005–2015, we find that better Shariah supervisory board (SSB) governance increases on-balance sheet liquidity creation but decreases off-balance sheet liquidity creation. This result is robust to an analysis of subsamples, to individual governance attributes, to interactions of dual governance mechanisms, and when controlling for endogeneity issues. Our results reveal that both SSBs and regular boards of directors affect liquidity creation by enhancing managerial ability.

History

Publication Date

01/01/2020

Journal

Global Finance Journal

Article Number

100543

Pagination

20p.

Publisher

Elsevier

ISSN

1044-0283

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The Author reserves all moral rights over the deposited text and must be credited if any re-use occurs. Documents deposited in OPAL are the Open Access versions of outputs published elsewhere. Changes resulting from the publishing process may therefore not be reflected in this document. The final published version may be obtained via the publisher’s DOI. Please note that additional copyright and access restrictions may apply to the published version.

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