Abstract
Purpose
The purpose of this paper is to examine the Shariah governance mechanisms of takaful insurance and their impact on its financial performance.
Design/methodology/approach
The effect of Shariah governance mechanisms on financial performance is analyzed over 2012–2018 on a sample of 11 takaful listed insurances in the Middle East region. Using multiple regression models, four hypotheses addressing Shariah governance mechanisms are tested.
Findings
The findings generally reveal that Shariah governance has an impact on the financial performance of takaful insurance. The Shariah Supervisory Board (SSB) size, the members’ reputation and their qualifications are the main determinants of financial performance for listed takaful insurance.
Research limitations/implications
This paper includes two main limitations that may affect the accuracy of the finding. First, the results are restricted to the Middle East region and may not be generalized to other regions. Second, the sample is dominated by UAE, i.e. 4 takaful insurances out of 11.
Practical implications
Both Shariah governance and regular governance have an impact on the financial performance of takaful insurance. Yet, the effect of Shariah governance is more robust. To improve its financial performance, takaful insurance should expand the size of the SSB, hiring reputable scholars and recruit doctors in Islamic economics.
Originality/value
This research studies takaful insurance, unlike the majority of other works that have focused on Islamic banks.
Subject
Strategy and Management,Accounting,Business and International Management
Cited by
2 articles.
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