Shariah-Compliant Governance and Corporate Financial Sustainability: A Critical Review of Theory and Evidence

As Islamic finance continues to gain traction worldwide, academic circles differ on whether Shariah-compliant governance (SCG) drives corporate financial sustainability (CFS) or merely adds to business expenses. However, research on this topic remains limited and inconclusive. To bridge this research gap, this study is the first to conduct a systematic literature review and critical narrative synthesis of 59 peer-reviewed articles published between 2020 and 2025 on the impacts of Shariah governance setups, such as Shariah supervisory boards (SSBs), corporate governance mechanisms, and Maqasid al-Shariah principles, on a company's financial performance, resilience, longevity, and value. The results indicate that SCG positively affects CFS, but the effects may vary by composition, context, and research design. The results suggest that the larger the SSB, the more knowledgeable and trustworthy the members; the more independent the members, the greater the performance improvement. Scholars have noted a lack of consensus on the best SSB board composition. This study presents the best and worst practices for corporate boards in Islamic finance organizations. This study identifies valid shortcomings in theorization, namely the absence of robust theoretical models and structures that test multiple mediator and moderator constructs. The research also indicates that most existing SSB-related studies have been conducted in Gulf Cooperation Council (GCC) countries and Southeast Asia; as a result, they may not be valid in other regions of the world. This study is the first comprehensive study to offer a detailed conceptual system. It combines five independent variables, three moderators, three mediators, and four control variables into a single conceptual system that presents testable hypotheses to check the effects of secondary variables and diagrams to interpret the influence of board variables on CFS. The findings will be valuable to policymakers and regulators in determining minimum SSB requirements and constraints on independence; managers and board members in improving the effectiveness of governance disclosures and building intellectual capital; and researchers in establishing, developing, and solidifying the research agenda and pathways.