An empirical investigation into the problems and challenges facing islamic banking in Malaysia

The establishment and operation of Islamic banking and finance is governed by Shari’ah principles. These specific underlying principles give a new dimension to its governance structure, which is known as Shari’ah Governance. The aim of this research is to examine the theoretical and practical aspects of problems and challenges facing Islamic banking and finance in Malaysia. The study focuses on four main issues: legal and regulatory framework, Shari’ah compliance, management, and accounting. In order to achieve the objectives, this study surveys different groups of respondents who are involved in the operation of Islamic banking and finance, using semi-structured interviews. The key respondents are members of the Shari’ah Committee, Shari’ah Officers and Chief Executive Officers (CEO). The major problems and challenges which emerged from the interview findings are the influence of the dual-banking environment, lack of support from the regulatory framework related to products and services, Shari’ah non-compliance, operation and management, lack of expertise in human capital, lack of accountability, and lack of influence of accounting practices and auditing. The majority of key respondents explicitly highlighted these findings. According to agency theory, accountability is the primary corresponding function for decision making in the banking system; however, this does not appear to be transparent in the Islamic banking sector. As in most contexts of Islamic banking, inadequate accounting practices are also considered to be the major challenge that Islamic banking face. Regarding this challenge, the Islamic banking system has not achieved the ultimate objective in implementing Shari’ah in the banking system. However, with constraint and uncertainty, several efforts have been made to achieve a homogeneous structure. Radical innovation of accounting practices that support Shari’ah could be the alternatives to assist the Islamic banking system to become more efficient and effective. Theories such as agency theory, stakeholder theory and institutional theory could serve as pillars to support the implementation in order to enhance Shari’ah activities. In addition, the explanation of agent morality of the stakeholder model is also important, as Islamic banking personnel need to uphold Shari’ah principles and commercial viability. Furthermore, institutional theories are employed in the explanation of the organisational behaviour of IBs

CONTINUOUS CREATION OF ENTREPRENEURIAL ORIENTATION: A REWARD AND REINFORCEMENT PERSPECTIVE

Entrepreneurial orientation is important for organization’s sustainability. However, there are continuous debates discussing about organizational factors that activate entrepreneurial orientation among employees. Using data for three cement manufacturing companies in the southern part of Peninsular Malaysia, this study examined the influence of reward and reinforcement in creating entrepreneurial orientation among employees. A quantitative research occupying a web based online survey was adopted in the research. Three hypotheses examining the relationship between reward and reinforcement and three entrepreneurial orientation dimensions were formulated and tested in the research. With a response rate of 70.4 per cent, the statistical finding revealed that reward and reinforcement has significant relationship with only innovativeness while it has failed to provide similar evidence of significant association for risk-taking and also pro-activeness

Developing a framework to identify new market ventures, generate and select new product ideas

This paper aims to develop a framework to identify new market ventures, generate and select new product ideas. The framework is designed to address the gap between the execution of growth strategy and new product development stages, which raised two critical questions: which new market to venture into and what new product to develop. Relevant literatures and frameworks were examined and assessed. The framework was developed and consisted of five main stages. This paper highlights how firms and organizations can apply this framework successfully as an instrument to help organizations discover the right new markets to venture into, create new product ideas and select the best ideas for new products. The contribution of this paper lies in the development of both S-G-E-T-D framework, which offers a guide for organizations, to understand the right process in offering their new products . The framework will be helpful for the organizations to move forward

Effects of Shariah supervisory board characteristics on credit risk of Islamic banks

The purpose of this paper is to examine the relationship between the effective characteristics (i.e. size, independence, female board, meeting frequency and remuneration) of Shariah supervisory Board (SSB) and its effects on the credit risk of Islamic banks (IBs). The study based on 504 Islamic bank-year observations from 56 banks in 18 countries between 2009 and 2017. The findings suggest that the SSB in Islamic banks with smaller size, the lower composition of female directors and higher remunerations are more likely to have lower credit risk. However, no evidence suggests that SSB with more independent directors and higher meeting frequency reduce the credit risk in Islamic banks. These findings will be of potential interest to policymakers and professionals in strengthening the role of SSB in Islamic banks. Moreover, the countries represented in this study have made significant contributions to the infrastructures of Islamic financial institutions around the world. Finally, the study outcome might also serve as another model for countries which seek to strengthen the role of SSB in managing IBs credit risk

Data Envelopment Analysis: A Tool of Measuring Efficiency in Banking Sector

The present paper examined the review of literature related to measuring relative efficiency of banks using Data Envelopment Analysis (DEA). The efficiency of banks is measure through the ability of the individual bank to maximise output given a certain level of input. By measuring its efficiency, it can serves as early warning or benchmark of its performance and it can define future improvement in various area such as managerial, technology or socio-economic. DEA is comprises of two basic model that are DEA CCR (Charnes-Cooper-Rhodes) Model with constant return to scale (CRS) assumption and DEA BCC (Banker-Charnes-Cooper) Model with variable return to scale (VRS) assumption. In banking industry, DEA is using two approaches that are production or intermediation approach. The former highlights banks as delivering services in the form of transaction and the later assumes banks intermediate funds between surplus units to deficit unit. The study of efficiency in banks with similar economic and political condition is important as banks operate in parallel. Keywords: Data Envelopment Analysis (DEA), Efficiency, Banking JEL Classifications: G2, M2, M

The relationship between CSR and financial performance: a literature review

Corporate social responsibility (CSR) concept has been widely understood. Organizations should not only pledge on their economic consequences but environmental and social implications as well. CSR value has been attained interest among practitioners, most of them are eager to ascertain if the social responsibility can elevate its financial performance. Anyhow, heterogeneous results and contrary between analysis data has been observed. This paper’s objective is to identify the relationship between CSR and financial performance. It contains the integration of literature review between years 2011 to 2015 from the academics and researchers relating to the CSR and financial performance. Despite from the main variables, other factors such as the mediating variables, the approach applied, the methodology techniques and the industries involved are being discussed. This paper draws a link between CSR and corporate financial performance more deeply through the literature reviews analysis. The segregation of the literature review is presumed to have the comprehensiveness added for the future studies. The findings appeared to be consistence where CSR has a positive relationship to the financial performance. It validated the worth for an organization’s efforts to apply CSR. Additionally, this study provides greater insights for future researchers to scrutinize in more specific area that will help to groom CSR in the industry

Examining the impact of corporate governance on intellectual capital: Empirical evidence of Islamic Banks

Using the sample of 59 Islamic banks during the period of 2006-2017, the purpose of this paper is to examine the impact of corporate governance mechanisms through the characteristics of board of directors that may influence the intellectual capital (IC) efficiency of Islamic banks. The characteristics of board of directors are represented throughthe size of the board (board size), the proportion of female members on the board (board female), the number of board meetings (board meeting), the proportion of board members who have financing and accounting expertise (board expertise) and the diversityin terms of board members’ nationalities (board nationality diversity). Meanwhile, IC efficiency has been measured using value-added intellectual coefficient (VAIC). This study provides empirical evidence showing that board expertise has positively associated with IC efficiency. This study also examines the linkage between corporate governance mechanisms and IC components namely HCE, SCE and CEE and found that board expertise exerts positive significant impact to HCE and SCE while no significant impact to CEE. Additionally, board female has significant positive relationship with SCE. The study is extremely pivotal in order to know the determinants that can contribute to the enhancement of IC efficiency in respect of corporate governance of Islamic banks

The impact of ethical decision making in the individual and organizational context

In this globalized and dynamic business environment, ethical decision-making has generated more concern to the business leadership. Its impact and significantly widespread effect on day-to-day business practices is advancing rapidly. Issues and risks that associated with unethical decision makings have created enormous uncertainty and cost to organizations. The unstable economic environment has thrust the business leaders to adhere to the pressure and challenges of ethical decision-making hence theories have suggested that it is purely different from individual traditional and rational decision-making. In much literature review in business ethics, contradictions and inconsistencies have evolved in organizational ethical decision-making. In this review paper, this current study will critique some effects and impacts of ethical decision making in the organizational and individual context. It will extend our understanding of ethical decision making on the part of leaders by merging social role and self-construal perspectives. The practical implication of this review paper indicated that for an organization to maintain its competitive advantage in this dynamic business environment, implementation of a rightful and thoughtful ways of ethical decision-making is essential to both the leaders and organizations to maintaining their reputation and competitive advantage. In this paper, some of the ethical model and approaches were reviewed, their essential importance to enhance ethical decision making and managerial implication in organizations. Many factors influencing organizational unethical decisions were investigated to discover the gaps and loophole thereby creating further and future research recommendations to cover the gaps