Purpose This study aims to investigate the impact of Sharia Supervisory Board (SSB) effectiveness on a multidimensional financial framework comprising liquidity, risk and market dynamics. Moving beyond linear relationships, the research explores how SSB functions as a dynamic capability resource (DCR) that enables Islamic banks in Gulf Cooperation Council (GCC) countries to navigate various operational regimes. Design/methodology/approach Using a quantitative approach, the study uses an extensive data set from Islamic banks across GCC countries (2018–2024). SSB effectiveness is measured through sharia educational background, meeting frequency, board size and independence. The “Three Regime Model” integrates liquidity (funding ratios), risk (asset quality/volatility) and market performance (market share/returns). To capture the dynamic nature of these resources, the study applies panel data analysis with an emphasis on regime-switching or threshold effects to identify how SSB influence shifts across different financial states. Findings The results demonstrate that effective SSBs serve as a critical dynamic capability, significantly enhancing the nexus between liquidity, risk management and market positioning. The findings reveal that the influence of SSB is not uniform but varies across different regimes; it is most potent in stabilizing the risk-liquidity trade-off during volatile market conditions. This confirms that ethical governance acts as a resource-reconfiguration mechanism that fosters institutional resilience and adaptive capacity in the GCC Islamic banking sector. Research limitations/implications This study provides a novel theoretical bridge between Sharia governance and the dynamic capability view. For regulators, the findings suggest that SSB mandates should evolve from simple compliance oversight to strategic resource roles. Strengthening the SSB’s capacity to manage the “three-regime” complexities is essential for maintaining systemic stability in Sharia-compliant financial ecosystems. Practical implications These insights assist Islamic bank managers in leveraging the SSB as a strategic asset to optimize liquidity and mitigate risk. By understanding the regime-dependent nature of governance effectiveness, banks can better align their ethical structures with market demands to improve long-term financial endurance. Originality/value This research offers a pioneering perspective by introducing the “Three Regime Model” within Islamic finance literature. It departs from traditional isolated variable analysis by integrating liquidity, risk and market factors under the lens of DCRs, providing a more holistic and realistic understanding of Sharia governance in the GCC region.
Ardianto et al. (Tue,) studied this question.