Islamic corporate governance and the financial performance of Sharia banks

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Abstract

The growth of the Islamic banking industry in Indonesia is increasingly significant, but the financial performance of several Islamic banks still shows fluctuations, especially in terms of profitability and problematic financing. One factor that is believed to play a role in creating financial stability and sustainability is the implementation of Islamic corporate governance (ICG), especially the role of the Sharia Supervisory Board (SSB). This study aims to analyze the effect of the number of SSBs on the financial performance of Islamic commercial banks in Indonesia, using data from 13 Islamic banks listed on the Indonesia Stock Exchange (IDX) during the 2020–2023 period. The method used is multiple linear regression, with financial performance indicators in the form of capital adequacy ratio (CAR), return on assets (ROA), non-performing financing (NPF), financing to deposit ratio (FDR), and operating expenses to operating income (beban operasional pendapatan operasional, BOPO). The results show that the number of SSBs has a significant positive effect on profitability (ROA) and a significant negative effect on NPF. This finding aligns with Mollah and Zaman (2015), who stated that “a better Sharia supervisory board’s effectiveness could increase Sharia compliance in Sharia banks” (p. 418). This study emphasizes the urgency of strengthening the role of the SSB in supporting financial stability and Sharia compliance of Islamic banks in Indonesia.

Keywords: Islamic Corporate Governance, Financial Performance, Sharia Supervisory Board

Authors’ individual contribution: Conceptualization — D.S.; Methodology — D.S. and M.; Formal Analysis — M.; Investigation — D.S., M., and W.; Writing — Original Draft — D.S., M., and W.; Writing — Review & Editing — D.S., M., and W.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E5, G3, M21

Received: 01.03.2025
Revised: 02.07.2025; 30.08.2025; 07.01.2026
Accepted: 29.01.2026
Published online: 02.02.2026

How to cite this paper: Rusdi, D., Mutamimah, & Widiyanto. (2026). Islamic corporate governance and the financial performance of Sharia banks. Journal of Governance and Regulation, 15(1), 233–242. https://doi.org/10.22495/jgrv15i1art21