Corporate Governance, Shari’ah Governance, and Financial Flexibility: Evidence from the MENA Region

Abdullah A. Aljughaiman, Aly Salama, Thanos Verousis*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)
33 Downloads (Pure)

Abstract

This paper investigates the relationship between corporate governance structures and financial flexibility for conventional and Islamic banks in the Middle East and North Africa (MENA) region. We construct a novel Financial Flexibility Index (FFI) for the banking sector and examine the impact of the Shari’ah supervisory board (SSB), board size, and risk governance on financial flexibility. We find that board size and risk governance significantly affect banks’ financial flexibility for Islamic and conventional banks. However, Shari’ah governance rules determine how that relationship is manifested in Islamic banks. We show that SSB size and busy SSBs enhance Islamic banks’ financial flexibility. Our results show that Western corporate governance structures may lead to suboptimal financial flexibility. Banking policies should re-evaluate the impact of one-size-fits-all approaches to corporate governance while promoting “soft policies” to banking regulation that are value-enhancing for the banking sector.
Original languageEnglish
Pages (from-to)1-20
Number of pages20
JournalInternational Journal of Finance and Economics
Early online date21 Aug 2023
DOIs
Publication statusE-pub ahead of print - 21 Aug 2023

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