156
Views
0
CrossRef citations to date
0
Altmetric
Other

Does political connection affect sharia non-compliance risk? Evidence from Indonesian and Malaysian Islamic banks

ORCID Icon & ORCID Icon
Received 26 Jan 2021, Accepted 12 Sep 2022, Published online: 05 Oct 2022

References

  • Aebi, V., G. Sabato, and M. Schmid. 2012. “Risk Management, Corporate Governance, and Bank Performance in the Financial Crisis.” Journal of Banking Finance 36 (12): 3213–3226.
  • Agrawal, A., and C. R. Knoeber. 2001. “Do Some Outside Directors Play a Political Role?” Journal of Law and Economics 4 (1): 179–198.
  • Ajili, H., and H. Khlif. 2020. “Political Connections, Joint Audit and Tax Avoidance: Evidence from Islamic Banking Industry.” Journal of Financial Crime 27 (1): 155–171.
  • Akkizidis, I., and S. K. Khandelwal. 2008. Financial Risk Management for Islamic Banking and Finance: Risk Management Issues in Islamic Financial Contracts. New York: Palgrave Macmillan.
  • Al-Shboul, M., A. Maghyereh, A. Hassan, and P. Molyneux. 2020. “Political Risk and Bank Stability in the Middle East and North Africa Region.” Pacific-Basin Finance Journal 60: 1–27.
  • Alam, M. K. 2021. “Rationality of Fourth Party in Legitimacy Theory: Shariah Governance of Islamic Financial Institutions.” Journal of Islamic Accounting and Business Research 12 (3): 418–438.
  • Alam, M. K., M. M. Rahman, M. K. Runy, B. S. Adedeji, and M. F. Hassan. 2021. “The Influences of Shariah Governance Mechanism on Islamic Banks Performance and Shariah Compliance Quality.” Asian Journal of Accounting Research, doi:10.1108/AJAR-112020-0112.
  • Angwin, D. N. 2006. “Movers and Shakers.” Chap. 2 in Angwin, Cummings, Smith, C, The Strategy Pathfinder.
  • Asai, K. 2016. “Political Connections and Financial Stability.” ISER Seminar Series, June 15.
  • Asutay, M., and N. Z. M. Sidek. 2021. “Political Economy of Islamic Banking Growth: Does Political Regime and Institutions, Governance and Political Risks Matter?” International Journal of Finance & Economics. 26: 4226–4261. doi:10.1002/ijfe.20114256.
  • Basiruddin, R., and H. Ahmed. 2020. “Corporate Governance on Shariah Non-Compliant Risk: Evidence from Southeast Asia.” Corporate Governance 20 (2): 240–262.
  • Bertrand, M., F. Kramarz, A. Schoar, and D. Thesmar. 2018. “The Cost of Political Connections.” Review of Finance 22 (3): 849–876. doi:10.1093/rof/rfy008.
  • Bhagat, S., and B. Bolton. 2008. “Corporate Governance and Firm Performance.” Journal of Corporate Finance 14: 257–273.
  • Blau, B. M., T. J. Brough, and D. W. Thomas. 2013. “Corporate Lobbying, Political Connections, and the Bailout of Banks.” Journal of Banking & Finance 37 (8): 3007–3017. doi:10.1016/j.jbankfin.2013.04.005.
  • Bliss, M. A., and F. Gul. 2012. “Political Connection and Cost of Debt: Some Malaysian Evidence.” Journal of Banking and Finance 36 (5): 1520–1527. doi:10.1016/j.jbankfin.2011.12.011.
  • BNM, Bank Negara Malaysia. 2010. Shariah Governance Framework for Islamic Financial Institutions. Kuala Lumpur: Islamic Banking and Takaful Department, Bank Negara Malaysia. https://www.bnm.gov.my/documents/20124/38335/5_Shariah_Governance_Framework_20101026.pdf.
  • Boubakri, N., S. Mansi, and W. Saffar. 2013. “Political Institutions, Connectedness, and Corporate Risk-Taking.” Journal of International Business Studies 44 (3): 195–215. doi:10.1057/jibs.2013.2.
  • Brennan, N. 2006. “Boards of Directors and Firm Performance: Is There an Expectations Gap?” Corporate Governance: An International Review 14 (6): 577–593.
  • Brogi, M., and V. Lagasio. 2022. “Better Safe Than Sorry. Bank Corporate Governance, Risk-Taking, and Performance.” Finance Research Letters 44: 1–12. doi:10.1016/j.frl.2021.102039.
  • Bukhari, K. S., H. M. Awan, and F. Ahmed. 2013. “An Evaluation of Corporate Governance Practices of Islamic Banks Versus Islamic Bank Windows of Conventional Banks: A Case of Pakistan.” Management Research Review 36 (4): 400–416.
  • Carlini, F., D. Cucinelli, D. Previtali, and M. G. Soana. 2020. “Don’t Talk Too Bad! Stock Market Reactions to Bank Corporate Governance News.” Journal of Banking & Finance 121: 105962.
  • Chabachib, M., A. Windriya, R. Robiyanto, and H. Hersugondo. 2019. “A Comparative Study of Indonesian and Malaysian Islamic Banks.” Banks and Bank Systems 14 (4): 55–68.
  • Choong, Y. V., C. K. Thim, and B. T. Kyzy. 2012. “Performance of Islamic Commercial Banks in Malaysia: An Empirical Study.” Journal of Islamic Economics Banking and Finance 8 (2): 67–80.
  • Dahya, J., A. A. Lonie, and D. M. Power. 1996. “The Case for Separating the Roles of Chairman and CEO: An Analysis of Stock Market and Accounting Data.” Corporate Governance – An International Review 4: 71–77. doi:10.1111/j.1467-8683.1996.tb00136.x.
  • Davis, J. H., F. D. Schoorman, and L. Donaldson. 1997. “Toward a Stewardship Theory of Management.” The Academy of Management Review 22 (1): 20–47.
  • Deegan, C. 2002. “Introduction: The Legitimising Effect of Social and Environmental Disclosures – A Theoretical Foundation.” Accounting, Auditing & Accountability Journal 15 (3): 282–311.
  • Demski, J., and G. Feltham. 1978. “Economic Incentives in Budgetary Control Systems.” Accounting Review 53: 336–359.
  • Disli, M., K. Schoors, and J. Meir. 2013. “Political Connections and Depositor Discipline.” Journal of Financial Stability 9 (4): 804–819.
  • Dryzek, J. S., B. Honig, and A. Phillips. 2008. The Oxford Handbook of Political Theory. Oxford Handbooks Online.
  • Eisenhardt, K. 1989. “Agency Theory: An Assessment and Review.” Academy of Management Review 14: 57–74.
  • Elnahass, M., V. Q. Trinh, and T. Li. 2021. “Global Banking Stability in the Shadow of Covid-19 Outbreak.” Journal of International Financial Markets, Institutions & Money 72 (2021): 101322. doi:10.1016/j.intfin.2021.101322.
  • Faccio, M. 2006. “Politically Connected Firms.” American Economic Review 96 (3): 369–386.
  • Faccio, M., R. Masulis, and J. J. McConnell. 2006. “Political Connections and Corporate Bailouts.” Journal of Finance 61 (1): 2597–2635.
  • Faleye, O., and K. Krishnan. 2017. “Risky Lending: Does Bank Corporate Governance Matter?” Journal of Banking & Finance 83: 57–69.
  • Fama, E. F. 1980. “Agency Problems and the Theory of the Firm.” Journal of Political Economy 88: 288–307.
  • Fan, J. P. H., T. J. Wong, and T. Zhang. 2007. “Politically Connected CEOs, Corporate Governance, and Post-IPO Performance of China’s Newly Partially Privatised Firms.” Journal of Financial Economics 84: 330–357.
  • Farag, H., C. Mallin, and K. Ow-Yong. 2018. “Corporate Governance in Islamic Banks: New Insights for Dual Bard Structure and Agency Relationships.” Journal of International Financial Markets 54: 59–77.
  • Fernandez, N. 2008. “EC: Board Compensation and Firm Performance: The Role of “Independent” Board Members.” Journal of Multinational Financial Management 18 (1): 30–44.
  • Fisman, R. 2001. “Estimating the Value of Political Connection.” American Economic Association 91 (4): 1095–1102. doi:10.1257/aer.91.4.1095.
  • Fu, J., D. Shimamoto, and Y. Todo. 2017. “Can Firms with Political Connections Borrow More Than Those Without? Evidence from Firm-Level Data for Indonesia.” Journal of Asian Economics 52: 45–55.
  • Fukuoka, Y. 2013. “Oligarchy and Democracy in Post-Suharto Indonesia.” Political Studies Review 11: 52–64.
  • Gati, V., and B. Basuki. 2020. “Shariah Supervisory Board, the Political Connection and Performance.” Revista Espacious 41 (22): 365–378.
  • Ghalamallah, E., C. Alexakis, M. Dowling, and A. Piepenbrink. 2021. “The Topics of Islamic Economics and Finance Research.” International Review of Economics & Finance 75: 145–160.
  • Gu, X., I. Hasan, and Y. Zhu. 2019. “Political Influence and Financial Flexibility: Evidence from China.” Journal of Banking & Finance 99: 142–156.
  • Habib, A., A. H. Muhammadi, and H. Jiang. 2017. “Political Connections and Related Party Transactions: Evidence from Indonesia.” International Journal of Accounting 52 (1): 45–63. doi:10.1016/j.intacc.2017.01.004.
  • Hagiwara, Y. 1974. “Political Leadership of the Malaysian Alliance Party: Rahman to Razak.” The Developing Economics 12 (4): 370–386.
  • Hassan, M., and J. Dridi. 2011. “The Effects of Global Crisis on Islamic and Conventional Banks: A Comparative Study.” Journal of International Commerce, Economics and Policy 2 (2): 163–200. doi:10.1142/S1793993311000270.
  • Hung, C. D., Y. Jang, F. H. Liu, H. Tu, and S. Wang. 2017. “Bank Political Connections and Performance in China.” Journal of Financial Stability 32: 57–69. doi:10.1016/j.jfs.2017.09.003.
  • IFSB, Islamic Financial Services Board. 2005. “Guiding Principles of Risk Management for Institutions (Other Than Insurance Institutions) Offering Only Islamic Financial Services.”
  • IFSB, Islamic Financial Services Board. 2009. “Guiding Principles on Shari’ah Governance Systems for Institutions Offering Islamic Financial Services.”
  • IFSB, Islamic Financial Services Board. 2016. “Islamic Financial Services Industry Stability Report 2016.”
  • Imam, P., and K. Kpodar. 2016. “Islamic Banking: Good for Growth?” Economic Modelling 59: 387–401. doi:10.1016/j.econmod.2016.08.004.
  • Jensen, M., and W. Meckling. 1976. “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure.” Journal of Financial Economics 3: 305–360.
  • Kasim, N. A. A. 2012. “Discolsure of Shariah Compliance by Malaysian Takaful Companies.” Journal of Islamic Accounting and Business Research 3 (1): 20–38.
  • Khan, T., and H. Ahmed. 2001. Risk Management: An Analysis of Issues in Islamic Financial Industry. Occasional Paper No.5. Jeddah: Islamic Research Training Institute.
  • Khwaja, A. I., and A. Mian. 2005. “Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market.” Quarterly Journal of Economics 120 (4): 1371–1411. doi:10.1162/003355305775097524.
  • King, T. H. D., and M. M. Wen. 2011. “Shareholder Governance, Bondholder Governance, and Managerial Risk-Taking.” Journal of Banking & Finance 35 (3): 512–531.
  • Laeven, L. 1999. “Risk and Efficiency in East Asian Banks.” World Bank Discussion paper. No. 2255.
  • Le, T. D. Q., T. H. Ho, D. T. Nguyen, and T. Ngo. 2022. “A Cross-Country Analysis on Diversification, Sukuk Investment, and the Performance of Islamic Banking Systems Under the COVID-19 Pandemic.” Heliyon 8 (3): e09106. doi:10.1016/j.heliyon.2022.e09106.
  • Lee, K. W., and C. L. Lok. 2020. “Busy Boards, Firm Performance and Operating Risk.” Asian Academy of Management Journal of Accounting and Finance 16 (2): 1–21.
  • Li, H., L. Meng, Q. Wang, and L. A. Zhou. 2008. “Political Connections, Financing and Firm Performance: Evidence from Chinese Private Firms.” Journal of Development Economics 81: 411–439.
  • Liedong, T. A., and T. Rajwani. 2017. “The Impact of Managerial Political Ties on Corporate Governance and Debt Financing: Evidence from Ghana.” Long Range Planning 51 (5): 666–679. doi:10.1016/j.lrp.2017.06.006.
  • Lindbloom, C. K. 1993. “The Implications of Organisational Legitimacy for Corporate Social Performance and Disclosure.” Paper presented at the Critical Perspectives on Accounting Conference, New York, April.
  • Maaloul, A., R. Chakroun, and S. Yahyaoui. 2018. “The Effect of Political Connections on Companies’ Performance and Value: Evidence from Tunisian Companies After the Revolution.” Journal of Accounting in Emerging Economies 8 (2): 185–204.
  • Mace, M. L. 1979. “Directors: Myth and Reality-Ten Years Later.” Rutgers University Law Review 32: 293.
  • Majid, M. A. 2010. “Productivity Growth of Malaysian Banks: Foreign-Owned Islamic Banks and Islamic Bank Subsidiaries.” Paper presented at Persidangan Kebangsaan Ekonomi Malaysia ke V (PERKEM V), Inovasi dan Pertumbuhan Ekonomi, Port Dickson, Negeri Sembilan, October 15–17.
  • Mietzner, M. 2006. The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict, Nationalism, and Institutional Resistance. Washington: East-West Center Washington.
  • Mohanty, S. K., H. J. Lin, E. A. Aljuhani, and H. J. Bardesi. 2016. “Banking Efficiency in Gulf Cooperation Council (GCC) Countries: A Comparative Study.” Review of Financial Economics 31: 99–107. doi:10.1016/j.rfe.2016.06.004.
  • Mohd Razif, N. F., and S. Mohamad. 2011. “Risk in Present Finance: An Assessment from Islamic Perspectives.” Paper presented in International Conference on Management ICM, 373–387. Penang: ICM.
  • Mukhibad, H., M. R. Rochmatullah, Rahmawati Warsina, and D. Setiawan. 2020. “Islamic Corporate Governance and Performance Based on Maqashid Sharia Index – Study in Indonesia.” Jurnal Siasat Bisnis 24 (2): 114–126.
  • Nainggolan, Y., H. Janice, and V. Peter. 2016. “Ethical Screening and Financial Performance: The Case of Islamic Equity Funds.” Journal of Business Ethics 137 (1): 83–99. doi:10.1007/s10551-014-2529-5.
  • Neselevska, O. 2013. “Do Political Connections Influence Corporate Governance Quality in Developing Economies? (A Study of the Ukranian Market)”. Thesis, Hanken School of Economics. Department of Economics.
  • Nguyen, T. X., K. Hoang, C. C. Nguyen, and T. N. Bach. 2021. “Do Different Political Connections Affect Firms’ Distress Risk Differently?” International Journal of Emerging Markets. doi:10.1108/IJOEM-08-2020-0874.
  • Nofitasari, W. A., and H. Endraswati. 2019. “Islamic Social Reporting (ISR) Analysis in Indonesia and Malaysia.” Journal Ilmu Ekonomi Syariah (Journal of Islamic Economics) 11 (2): 341–356.
  • Noor, N. S. M., G. I. Abdul, and M. H. M. Shafiai. 2018. “Shariah Risk: Its Origin, Definition, and Application in Islamic Finance.” SAGE Open 8: 1–12. doi:10.1177/2158244018770237.
  • Nys, E., A. Tarazi, and I. Trinugoho. 2015. “Political Connections, Bank Deposits, and Formal Deposit Insurance.” Journal of Financial Stability 19: 83–104. doi:10.1016/j.jfs.2015.01.004.
  • Olson, D., and T. Zoubi. 2017. “Convergence in Bank Performance for Commercial and Islamic Banks During and After the Global Finance Crisis.” The Quarterly Review of Economics and Finance 65: 71–87. doi:10.1016/j.qref.2016.06.013.
  • Polsiri, P., and P. Jiraporn. 2012. “Political Connections, Ownership Structure and Financial Institution Failure.” Journal of Multinational Financial Management 22 (1-2): 39–53.
  • Prabowo, M. 2013. “Performance of Family-Controlled Firms: Do Political Connections Matter?” Jurnal of Akuntansi & Auditing Indonesia 17 (2): 115–122. doi:10.20885/jaai.vol17.iss2.art3.
  • Pradiknas, T. Y., and T. Faturohman. 2015. “Efficiency of Islamic Banking Compared to Conventional Banking: Evidence from Indonesian Banking Sector.” Journal of Business and Management 4 (5): 540–551.
  • Ramlan, H., and M. S. Adnan. 2016. “The Profitability of Islamic and Conventional Bank: Case Study in Malaysia.” 7th International Economics & Business Management Conference, 359–367. doi:10.1016/S2212-5671(16)00044-7.
  • Rashid, A. 2018. “Board Independence and Firm Performance: Evidence from Bangladesh.” Future Business Journal 4: 34–49. doi:10.1016/j.fbj.2017.11.003.
  • Ridwan, R., and A. G. Mayapada. 2020. “Does Sharia Governance Influence Corporate Social Responsibility Disclosure in Indonesia Islamic Banks?” Journal of Sustainable Finance & Investment. doi:10.1080/20430795.2020.1749819.
  • Saba, I., M. M, A. A. Kareem, and M. Eskandar. 2016. “Impact of Political Connections and Shari’ah Compliance on Firms’ Profitability – A Case Study of Malaysia.” COMSATS Institute of Information Technology Lahore 1: 44–56. doi:10.26652/cjif.120165.
  • Safieddine, A. 2009. “Islamic Financial Institutions and Corporate Governance: New Insights for Agency Theory.” Corporate Governance: An International Review 17: 142–158.
  • Shahar, N. A., A. Nawawi, and A. S. A. P. Salin. 2020. “Shari’a Corporate Governance Disclosure of Malaysian IFIS.” Journal of Islamic Accounting and Business Research 11 (3): 843–868.
  • Shen, C. H., C. Y. Lin, and Y. C. Wang. 2015. “Do Strong Corporate Governance Firms Still Require Political Connection and Vice Versa?” International Review of Economic and Finance 39 (3): 107–120. doi:10.1016/j.iref.2015.06.006.
  • Siddiqi, M. N. 2008. “The Current Financial Crisis and Islamic Economics.” IIUM Journal of Economics & Management 16 (2): 125–132.
  • Solomon, S. J., J. S. Bendickson, M. R. Marvel, W. C. McDowell, and R. Mahto. 2021. “Agency Theory and Entrepreneurship: A Cross-Country Analysis.” Journal of Business Research 122: 466–476.
  • Suchman, M. C. 1995. “Managing Legitimacy: Strategic and Institutional Approaches.” Academy of Management Review 20 (3): 571–610.
  • Sundararajan, V. 2007. “Risk Characteristics of Islamic Products: Implications for Risk Measurement and Supervision.” In Islamic Finance: The Regulatory Challenge, edited by R. Ahmed, and A. Karim, 40–68. Singapore: John Wiley.
  • Sutopo, B., I. Trinugroho, and S. M. Damayanti. 2017. “Politically Connected Banks: Some Indonesian Evidence.” International Journal of Business and Society 18 (1): 83–94.
  • Tessema, A. 2019. “The Impact of Corporate Governance and Political Connections on Information Asymmetry: International Evidence from Banks in the Gulf Cooperation Council Member Countries.” Journal of International Accounting, Auditing and Taxation 35: 1–17.
  • Trinugroho, I. 2017. “A Recent Literature Review on Corporate Political Connections.” Jurnal Dinamika Manajemen 8 (2): 269–278.
  • Victoria, O. A., and F. Ameer. 2018. “Systems and Political Development in Malaysia.” International Journal of Law Reconstruction 2 (2): 122–137.
  • Werner, R. A. 2016. “A Lost Century in Economics: Three Theories of Banking and the Conclusive Evidence.” International Review of Financial Analysis 46: 361–379.
  • Yahya, H., J. Muhammad, and A. Hadi. 2012. “A Comparative Study on the Level of Efficiency Between Islamic and Conventional Banking Systems in Malaysia.” International Journal of Islamic and Middle Eastern Finance and Management 5 (1): 48–62. doi:10.1108/17538391211216820.
  • Yang, D., Z. Lu, and D. Luo. 2014. “Political Connections, Media Monitoring and Ling-Term Loans.” China Journal of Accounting Research 7 (3): 165–177.
  • Yeh, Y. H., P. G. Shu, and S. B. Chiu. 2013. “Political Connections, Corporate Governance and Preferential Bank Loans.” Pasific Basin Journal 21 (1): 1079–1101.
  • Yeyati, E. L., and A. Micco. 2007. “Concentration and Foreign Penetration in Latin American Banking Sectors: Impact on Competition and Risk.” Journal of Banking and Finance 31 (6): 1633–1647.
  • Zhao, Q., W. Suowen, and C. Chao. 2014. “Political Connection, Management Promotion and Risk-Taking Activities.” Modern Economy 5: 774–784. doi:10.4236/me.2014.57071.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.