Recomendaciones de la Procuraduría General de la Nación sobre el Modelo de Centro Transitorio

The first research question was: “To what extent is the level of AAOIFI governance disclosure in IBs?” To answer this question, the current study provides a new comprehensive index based on all AAOIFI governance standards updated in 2010, which includes 56 items. The current study expects high standards of AAOIFI governance disclosure from IBs that mandatorily adopt AAOIFI standards, due to these standards having comprehensive guidance for IFIs. However, the results of this research do not provide evidence in terms of AAOIFI governance disclosure in IBs in the sample of this research. The average level of AAOIFI governance disclosure between all of the samples was 33%, which indicated that the level of AAOIFI governance standards disclosure for IBs is low. Also, the level remained comparatively low for each country throughout the three years of the study. The Arabic Islamic Bank in Palestine and the Syrian International Islamic Bank were

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the banks that disclosed the highest levels of AAOIFI governance standards – approximately 70%, while the bank that disclosed the lowest level was the Blue Nile Mashreg Bank in Sudan – approximately 4%. This means that 70% of the required information relating to AAOIFI governance disclosure was disclosed in the Arabic Islamic Bank in Palestine and the Syrian International Islamic Bank, and only 4% was disclosed by the Blue Nile Mashreg Bank in Sudan. While in the situation of IBs in Oman, the results highlighted that there was an advance in the level of AAOIFI governance disclosure, from 18% in 2013 to 52% in 2015. This means that IBs in Oman increased the level of required information for the AAOIFI governance. Also, the trend for AAOIFI governance disclosure in relation to the reporting of CG information has increased slightly in most IBs over the sample period. The highest dimensional analysis score across all AAOIFI governance was the SSB standard, at 63%, and the lowest was SR, at 9%.

Overall, regardless of the high expectation of AAOIFI governance disclosure in IBs, the analysis highlighted that the majority of IBs that adopt AAOIFI mandatorily, disclosed significantly lower results than what is required. The underperformance in the AAOIFI governance disclosure practice of IBs might be because AAOIFI governance standards are not mandatory and the AAOIFI cannot enforce these standards in IFIs. Moreover, there is both a culture that exists in these countries and a political system that is followed, which may mean that there is a preference not to disclose every aspect of Islamic life. Also, some of the countries in the sample do not have a CG code. So, there is an important need for the AAOIFI governance and Sharia governance to offer clear guidance that is enforced and integrated into IBs, to progress the level of disclosure in these banks.

With regard to the second research question: “To what extent do CG mechanisms affect AAOIFI governance disclosure in IBs?” The current research contributes to Islamic accounting literature, by identifying the drivers for the disclosure of AAOIFI governance standards, and by considering the impact of bank governance on the disclosure level among IBs that mandatorily adopt AAOIFI standards. The study found that ACs was the only characteristic that was statistically significant and positive, and all of the other CG characteristics were statistically insignificant. This result indicates that IBs that mandatorily adopt AAOIFI standards were following the standards with regard to this point, which requires there to be at least three members of an audit committee (AAOIFI, 2015). Also, there is a greater possibility that ACs in IBs leads to the disclosure of more information to all stakeholders because there is a high level of accountability to ensure that IBs are compliant with Sharia. Of the control variables (firm characteristics), only one of them was found to be statistically significant, namely asset growth.

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With regard to the third research question: “What is the impact of AAOIFI governance disclosure on the IBs’ performance?” In this study, the AAOIFI governance disclosure index, structured in the first empirical research, is used as an independent variable. ROA and ROE are used as measures of financial performance and the CG characteristics, firm mechanisms are used in this paradigm as control variables, which consider the most significant factors for CG disclosure and financial performance relationship.

Next, revising the theoretical framework of the association between CG disclosure and bank performance, based on agency theory, which accepts that better CG leads to a reduction in agency costs; improved governance practice; voluntary disclosure; and financial performance (Fama and Jensen, 1983), it is hypothesised that there is a positive association between the level of AAOIFI governance disclosure and financial performance in IBs. The study found that the association between AAOIFI governance disclosure and financial performance is statistically insignificant in both of the models. This result is inconsistent with the hypothesis and argued theoretical framework. Therefore, it can be seen that a high level of AAOIFI governance disclosure does not affect the financial performance of IBs. The reason for this outcome might be due to the reality that the main aim of IBs is to comply with Sharia principles, to have an active role in the community, and to deliver the expectation of value to clients and shareholders by focusing on Sharia compliance, more than just making a profit. Also, this may be because other factors such as SSB characteristcs or corporate social responsibility disclosure, impact the financial performance of IBs more than AAOIFI governance disclosure.

Of the control variables in both regression results, four out of a total of nine were found to be statistically significant, namely – board independence, board size, asset growth and leverage. The other five, namely – board meeting, CEO, ACs, firm size and liquidity – were found to be statistically insignificant.