Examining the effect of Shariah Supervisory Boards on the performance of Islamic banks using panel data

The rapid growth of Islamic banking has increased the importance of effective governance, particularly the role of Shariah Supervisory Boards (SSBs) in ensuring compliance with Islamic principles. However, limited empirical evidence exists on how SSB characteristics affect financial performance. This study examines the impact of SSB size, independence, and expertise on the financial performance of Islamic banks, measured by return on assets (ROA), return on equity (ROE), and net asset value (NAV). Using panel data from 20 Islamic banks in Bangladesh, Malaysia, the United Arab Emirates, and Saudi Arabia from 2011 to 2022, the study draws on annual reports, BankScope, and central bank publications. Feasible generalized least squares (FGLS) is employed to address heteroskedasticity and autocorrelation, while random effects estimation is used for robustness checks. The findings show that SSB size and expertise positively and significantly influence ROA, ROE, and NAV, whereas SSB independence has no significant effect. Expertise has the strongest positive association, especially for NAV. The results highlight the importance of SSB composition in enhancing financial performance and suggest that larger and more knowledgeable boards strengthen governance effectiveness in Islamic banks.