Do board characteristics affect the financial soundness of Islamic banks

Abstract

Abstract
This paper was conducted to analyze the impact of the Board of Directors’ characteristics on 
the financial soundness of Islamic banking, using panel data regression. Composed of 67 
Islamic banks over 2015-2018 period. The level of Islamic bank soundness is individually 
employing the Z-score measure Overall, the results of this study indicate that the soundness of 
Islamic banks is not adversely affected by the appointment of the independent non-executive 
director and the institutional director. However, the foreign director and the femal director have 
a positive impact on the financial soundness of banks. While, the Board of Directors’ size does 
not have any significant effect on the financial soundness of Islamic banks. With this study, we 
hope to provide new insights to the literature review andidentify the relationship between the 
Board of Directors and the financial soundness of Islamic banking. It has been recommended 
to increase the level of female presence and the foreignon the Board of Directors of Islamic 
banks.

Keywords
Board of Directors, Corporate Governance, Financial soundness, Gender diversity, Islamic Banking, Shariah compliance.