The impact of Shariah Advisory Board characteristics on the financial performance of Islamic banks

Figures & data

Table 1. Presentation of FP parameters

The dependent variables	FP parameter	Label	Specific ratio	Baseline studies
	Liquidity	L	Net Loans/Total Assets	Smaoui et al. (2020); Haddad et al. (2021)
	Profitability	P	Marginal Profit/Total Revenues	Haddad et al. (2019b); Saif-Alyousfi and Saha (2021)
	Solvency	S	Total Loans/Total Deposits	Ola and Suzanna (2015); Haddad et al. (2019c)
	Efficiency	E	Operating Result/Average Total Assets	Haddad et al. (2019a); Ali Shah et al. (2021)
The independent variables	SAB characteristic	Label	Unit of measure	Baseline studies
	SAB size	TCOMCH	Number of advisers on the SAB	Mollah and Zaman (2015); Safiullah and Shamsuddin (2018)
	Mastery of Shariah principles by the SAB members	MAITCH	Number of Chouyoukh specialists in Fekh sitting on the SAB	Ghayad (2008); Safiullah and Shamsuddin (2018)
	Scientific competence of SAB members	COMPMEMCH	Number of specialists in Islamic accounting and/or finance serving on the SAB	Nurhastuty & Shaista (2012); Hamza (2013)
	Number of meetings helds by the SAB	REUCOMCH	Annual meetings held by the SAB	Nurhastuty & Shaista (2012); Darmadi (2013b)
The Control variables	Control variable	Label	Unit of measure	Baseline studies
	Inflation	INF	The inflation rate in the country where the IB is located	Fang et al. (2019); Le et al. (2020)
	Bank age	AG	Age of IB until relevant year	Arif et al. (2017); Aysan et al. (2017)
	Bank type	TY	A qualitative variable with three forms:1: The bank is commercial 2: The bank is investment 3: The bank is universal	Kim and Rasiah (2010); Charles et al. (2015)
	Bank size	TA	Logarithm of total assets of IB	Keffala (2020); Smaoui et al. (2020)

Table 2. Descriptive statistics of IBs’ sample

IBs’ sample N = 1800 Observations
Variable	Nombre d’observation	Moyenne (Mean)	Ecartype (Std.Dev.)	Min	Max
L	1800	1.42	0.88	0.60	2.25
LnP	1800	2.775	0.94	−0.28	5.83
LnS	1800	0.49	0.63	−3.81	4.79
E	1800	0.085	0.21	−0.29	0.46
TCOMCH	1800	11.5	0.86	1	22
MAITCH	1800	9.5	0.53	1	18
COMPMEMCH	1800	8	0.94	0	16
REUCOMCH	1800	21.5	0.72	0	43
LnINF	1800	4.81	0.93	−3.07	12.69
LnAG	1800	21	0.91	0	42
TY	1800	2	0.27	1	3
LnTA	1800	2.285	0.66	0.39	4.18

Table 3. Hausman Test of each model

Model type	χ ^2	Prob> χ ^2	Type d’effet
L Model	11.72	0.5164 >10%	Random effect model
LnP Model	13.85	0.2639 >10%	Random effect model
LnS Model	25.04	0.0007 <1%	Fixed effect model
E Model	23.30	0.0015 <1%	Fixed effect model

Table 4. Arellano-Bond endogeneity Tests per model

Model type	Number ofobservations	Endogeneity Test		Decision
		A.B.-Value	p-Value
L Model	1800	0.7092	0.4611	There is no endogeneity bias
LnP Model	1800	3.8214	0.2596	There is no endogeneity bias
LnS Model	1800	1.6627	0.3473	There is no endogeneity bias
E Model	1800	−4.951	0.8162	There is no endogeneity bias
Based on the Arellano-Bond tests, we accepted the null hypothesis of no first-order autocorrelation for all our models.

Table 5. Variation Inflation Factor (VIF) Tests for the multicollinearity per model

Variable/Model	L VIF	LnP VIF	LnS VIF	E VIF
LnTCOMCH	2.86	2.46	1.35	2.94
LnMAITCH	2.15	2.85	1.84	2.60
LnCOMPMEMCH	1.42	1.72	2.66	1.46
LnREUCOMCH	1.29	1.15	2.14	1.53
LnINF	1.14	1.17	1.97	1.12
LnAG	1.03	1.34	2.61	1.37
TY	1.79	1.14	1.24	1.15
LnTA	1.46	1.58	1.08	1.39
Mean VIF	1.64	1.67	1.86	1.69
The analysis of VIF tests of all models revealed that there is no value exceeding the 5 threshold. The maximal recorded VIF average for the solvency model is equal to (1.86). In the L model, the highest recorded VIF is equal (2.86) for the.LnTCOMCH. In the LnP model, we have found that the highest VIF is recorded by LnMAITCH (2.85). In the LnS model, we found that the highest VIF was reported by LnCOMPMEMCH (2.66). While for the E model, the highest VIF is equal (2.94) (LnTCOMCH).

Table 6. Multicolinearity Test (Spearman correlation matrix)

L

LnP

LnS

E

LnTCOMCH

LnMAITCH

LnCOMPMEMCH

LnREUCOMCH

LnINF

LnAG

TY

LnTA

L

1.0000

LnP

0.0461 0.4528

1.0000

LnS

0.4809* 0.0000

0.0134 0.5269

1.0000

E

−0.0040 0.1430

0.2356* 0.0001

−0.2889* 0.0000

1.0000

LnTCOMCH

0.1637* 0.0036

−0.1107* 0.0704

0.1292* 0.0218

−0.1167* 0.0385

1.0000

LnMAITCH

0.1282* 0.0229

−0.1651* 0.0068

0.0184 0.7452

−0.0332 0.5568

0.8784* 0.0000

1.0000

LnCOMPMEMCH

−0.0208 0.7171

−0.1533* 0.0135

−0.0493 0.3904

0.0174 0.7616

0.7865* 0.0000

0.7657* 0.0000

1.0000

LnREUCOMCH

0.0658 0.2550

0.0089 0.2881

0.0386 0.5048

0.0779 0.1779

0.2121* 0.0002

0.1940* 0.0007

0.1776* 0.0021

1.0000

LnINF

−0.2851* 0.0000

−0.2621* 0.0000

−0.2538* 0.0000

0.1208* 0.0350

−0.0754 0.1889

−0.0381 0.5076

0.1098* 0.0592

−0.1107* 0.0592

1.0000

LnAG

−0.0025 0.3655

0.1828* 0.0027

−0.0620 0.2741

0.3297* 0.0000

0.0138 0.4079

0.1605* 0.0044

0.0059 0.6186

0.0660 0.2549

0.1029* 0.0738

1.0000

TY

−0.1769* 0.0016

0.0356 0.5615

−0.0217 0.7006

−0.0665 0.2389

−0.1310* 0.0200

−0.1538* 0.0062

0.0442 0.4412

0.1738* 0.0025

−0.0201 0.7266

−0.2066* 0.0002

1.0000

LnTA

0.4264* 0.0000

0.0227 0.7143

0.2556* 0.0000

0.1179* 0.0379

0.2933* 0.0000

0.4045* 0.0000

0.2291* 0.0001

0.0780 0.1770

−0.1956* 0.0007

0.3178* 0.0000

−0.1476*0.0093

1.0000

Table 7. Heteroscedasticity Tests per model

Model type	Modified Wald Test	Breusch-Pagan Test	χ^2	Prob>χ^2	Heteroscedasticity
L Model	-	Breusch-Pagan Test	34.22	0.0000 <5%	Absence of the heteroscedasticity
LnP Model	-	Breusch-Pagan Test	30.14	0.0002 <5%	Absence of the heteroscedasticity
LnS Model	Modified Wald Test	-	4.2e+06	0.0017 <5%	Absence of the heteroscedasticity
E Model	Modified Wald Test	-	2.5e+06	0.0000 <5%	Absence of the heteroscedasticity
Based on the heteroscedasticity tests, no model has registered this problem.

Table 8. Autocorrelation Tests per model

Model type	Wooldridge Test	Durbin Watson Test	Fisher	P >F	Autocorrelation	Decision
L Model	-	Durbin Watson Test	0.439	0.5101 >5%	Absence of autocorrelation	Random effect
LnP Model	-	Durbin Watson Test	5.078	0.2831 >5%	Absence of autocorrelation	Random effect
LnS Model	Wooldridge Test	-	39.547	0.1632 >5%	Absence of autocorrelation	Fixed effect
E Model	Wooldridge Test	-	9.40	0.4963 >5%	Absence of autocorrelation	Fixed effect
Based on the autocorrelation results, all models signaled that there is no autocorrelation between the variables.

Table 9. Random Effect Results of the SAB’s impacts on the IBs’ liquidity

Lit	Coefficient	Std. Err.	Z	P>|z|	[95% Conf. Interval]
LnTCOMCH	0 .3544939	0.0931786	0.58	0.007***	0.1281327	0.2371205
LnMAITCH	0.2798778	0.0776623	0.77	0.000***	0.2120931	0.0923376
LnCOMPMEMCH	−0.0635027	0.0532571	−0.25	0.012**	−0.1178846	−0.0908793
LnREUCOMCH	0.1834428	0.0339297	0.10	0.009***	0.0630583	0.0699438
LnINF	−0.0400161	0.0206578	−0.97	0.033**	−0.0605046	−0.0204725
LnAG	0.083148	0.0237861	0.13	0.000***	0.0434718	0.0497678
TY	−0.035508	0.0364522	−0.97	0.016**	−0.1069529	−0.035937
LnTA	0.3270832	0.0950085	3.44	0.001***	0.1408699	0.5132965
Constant	−0.0655216	0.2133602	−0.31	0.759	−0.4837	0.3526568

Table 10. Random effect Results of the SAB’s impacts on the IBs’ profitability

LnPit	Coefficient	Std. Err.	Z	P>|z|	[95% Conf. Interval]
LnTCOMCH	1.405375	0.4510463	3.12	0.002***	0.5213406	2.28941
LnMAITCH	1.304607	0.3873213	3.37	0.016**	2.063743	0.5454716
LnCOMPMEMCH	−0.4625773	0.2486884	−0.25	0.011**	−0.5499975	0.424843
LnREUCOMCH	−0.1592187	0.1692598	−0.94	0.000***	−0.4909618	0.1725245
LnINF	−0.2708516	0.1107027	−2.45	0.014**	−0.4878248	−0.0538783
LnAG	0.4027589	0.129704	3.11	0.002***	0.1485436	0.6569741
TY	0.1887143	0.1389674	0.78	0.064*	0.1636568	0.3810854
LnTA	−0.2373851	0.445224	−0.08	0.003***	−0.9100082	−0.8352379
Constant	1.798464	1.042917	1.72	0.085	−0.2456164	3.842545

Table 11. Fixed Effect Results of the SAB’s impacts on the IBs’ solvency

LnSit	Coefficient	Std. Err.	Z	P>|z|	[95% Conf. Interval]
LnTCOMCH	0.991737	1.382132	0.72	0.017**	1.717191	3.700665
LnMAITCH	1.693332	1.153232	1.47	0.000***	3.953626	0.5669617
LnCOMPMEMCH	−0.2737004	0.7913144	−0.35	0.083*	−1.824648	1.277247
LnREUCOMCH	1.278726	0.5022494	2.55	0.011**	0.2943357	2.263117
LnINF	−0.1819077	0.3055242	−0.60	0.052*	−0.7807241	0.4169086
LnAG	−0.1315416	0.3543002	−0.37	0.000***	−0.8259572	0.5628741
TY	−0.080593	0.5480412	−0.02	0.785	−1.063548	1.084734
LnTA	1.827242	1.418797	4.81	0.000***	4.046451	9.608034
Constant	−15.07475	3.181105	−4.74	0.000	−21.3096	−8.839898

Table 12. Fixed Effect Results of the SAB’s impacts on the IBs’ efficiency

Eit	Coefficient	Std. Err.	Z	P>|z|	[95% Conf. Interval]
LnTCOMCH	0.2583613	0.0159419	0.52	0.163	−0.0228843	0.0396068
LnMAITCH	0.198805	0.0128817	0.68	0.494	−0.0340526	0.0164427
LnCOMPMEMCH	−0.1423554	0.0087091	−0.27	0.096*	−0.0147141	0.0194249
LnREUCOMCH	0.0731295	0.0062028	0.50	0.614	−0.0090279	0.0152868
LnINF	0.0571386	0.0039727	0.03	0.018**	0.007925	0.0076478
LnAG	0.0647	0.0036832	3.99	0.000***	0.0074811	0.0219189
TY	−0.0019041	0.0045816	−0.42	0.678	−0.0108839	0.0070756
LnTA	0.1516217	0.0138421	0.84	0.001***	0.0155083	0.0387516
Constant	−0.0605963	0.0327138	−1.85	0.064	−0.1247142	0.0035216

Table 13. Summary of the impacts of SAB size on the IBs’ FP

Variable	L	LnP	LnS	E	Combined impact	Decision
LnTCOMCH	+*	+*	+*	+	+	H1 accepted

Table 14. Summary of the mastering Fekh-Shariah impacts on the IBs’ FP

Variable	L	LnP	LnS	E	Combined impact	Decision
LnMAITCH	+*	+*	+*	+	+	H2 accepted

Table 15. Summary of the impacts of the accounting and financial competence of SAB members on the IBs’ FP

Variable	L	LnP	LnS	E	Combined impact	Decision
LnCOMPMEMCH	-*	-*	-*	-*	-	H3 rejected

Table 16. Summary of the meetings’ number impacts held by the SAB on the IBs’ FP

Variable	L	LnP	LnS	E	Combined impact	Decision
LnREUCOMCH	+*	-*	+*	+	+	H4 accepted

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