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This study investigates the impact of characteristics and role of Shar¯ı‘ah Supervisory Board (SSB) and corporate governance mechanisms on efficiency in Islamic Banks (IBs). A sample of 30 banks is drawn from those IBs that are listed on Asian stock markets. Corporate and SSB act as guardians of rights of minority shareholders by constantly monitoring controlling shareholders. The characteristics of both these boards affect the procedures installed thus affecting efficiency of these financial institutions. Multivariate panel data regression analysis is employed as the estimation procedure. The results show that a few characteristics of both the boards are positively related to efficiency. The study reports an empirical evidence of positive association between size of the SSB, audit committee independence and efficiency of banks listed in Asia. The results of this study suggest that the users of financial statements should consider characteristics of corporate as well as Shar¯ı‘ah boards for the evaluation of respective Islamic banks. This study also notifies that in order to improve efficiency, the regulators should set forth guidelines regarding the size of SSB as well as the percentage of independent members on the audit committee in Islamic banks where governance is shared between the two boards, regulations are constantly being developed and installed with somewhat limited knowledge and skill of board members regarding the implementation of these regulations to improve efficiency.
Saeed et al. (Sat,) studied this question.