Governance Structures as Drivers of Performance in Islamic Banks

This study investigates the impact of corporate governance structure on Islamic banking performance, focusing on four key dimensions: board size, Shariah governance, board independence, and ownership structure. The study utilized a quantitative methodology that involved collecting survey data through questionnaires, and the subsequent analysis was carried out using SmartPLS4, a partial least squares structural equation modeling (PLS-SEM) software. The results of the measurement model confirmed reliability and validity throughout every construct examined. Meanwhile, the structural model showed sufficient explanatory power and satisfactory predictive relevance. Hypothesis testing revealed that governance structures play a significant role in shaping the financial aspects of Islamic banking performance. This study's findings present empirical evidence reinforcing the significance of strong governance in promoting the sustainability and the competitive edge of Islamic banking, primarily as it operates within Indonesia. This study makes a valuable contribution to the existing body of knowledge on Islamic finance by focusing on key governance elements that drive improved performance, while also providing helpful information that regulators and policymakers can utilize to strengthen the governance structure within the Islamic banking industry.