Balancing Faith and Finance: How Ownership Structures Shape the Impact of Shariah Governance on Islamic Bank Performance

This research examines the complex relationship between the practices of Shariah governance (SG), the ownership characteristics, and the financial performance (FP) of Islamic banks (IB). Using quantitative data within a particular financial setting, we analyze the influence of the Shariah governance index (SG_INDEX) on FP measured using return on assets (ROA), return on equity (ROE), and Tobin's Q (TQ). Data was collected from 58 IBs in nine Middle Eastern countries. The results exhibit a positive relationship between SG and IB performance. In addition, we examined the moderating role of OC (OC) and the type of ownership (public or private) between SG and bank FP. The findings of this study showed that OWN_CON moderated negatively the effect of SG_INDEX on ROA and TQ. In addition, the OWN_TYPE moderated positively the effect of SG_INDEX on ROE and TQ. IB in the Middle East has to strengthen its SG by considering all the components and balancing its OWN_CON to enhance the performance of FP of IB in the region.