Corporate governance and intellectual capital: its impact on Islamic banking performance in OIC countries

Purpose This study aims to examine the impact of intellectual capital (IC) on Islamic bank performance (IBP), using four performance indicators: asset turnover, return on assets, return on equity and non-performing loans. It further investigates how corporate governance (CG) mechanisms – specifically board size, board independence and Shariah board involvement – mediate the relationship between IC and IBP. The study supports the broader objectives of socioeconomic justice and sustainable development in Islamic finance. Design/methodology/approach The study uses data from 136 Islamic banks across 29 Organization of Islamic Cooperation (OIC) countries from 2012 to 2023. Analytical methods include structural equation modeling with partial least squares and path analysis to evaluate direct and mediated effects. Findings The findings indicate that IC significantly enhances IBP. All three IC components – human capital efficiency, structural capital efficiency and relational capital efficiency – positively affect performance. Moreover, board size and Shariah board involvement serve as effective mediators. However, Board Independence exhibits a significant adverse effect, suggesting that excessive independence may undermine the efficient use of IC. Research limitations/implications The study recommends that Islamic banks strategically optimize IC and reinforce governance practices, particularly those related to board structure and Shariah compliance. These efforts are critical for enhancing performance and ensuring financial resilience. Further research is suggested to expand CG variables and assess their effects on financial inclusion and ethical banking outcomes. Originality/value This study offers a novel contribution by specifically analyzing Islamic Bank Performance (IBP) across 29 OIC countries – an object of study that has received limited attention in the literature. To the best of the authors’ knowledge, it is among the first to empirically test the mediating role of CG in the IC – IBP relationship within the context of Islamic finance. The findings offer actionable insights into optimizing IC and governance design to foster competitive advantage and support Islamic finance’s ethical and development-oriented mission.