Linking corporate governance with organisational growth: evidence from Indonesian Islamic banks

Abstract

Purpose This study aims to investigate the link between corporate governance (CG) and organisational growth in Indonesian Islamic banks. Moreover, this research exposes the root causes of stagnancy in Indonesian Islamic banks from a governance perspective. Design/methodology/approach This study used quantitative data such as secondary and primary data. This study used panel data analysis and examined managers’ perspectives of CG elements to show Islamic banking growth in Indonesia. The panel data set was extracted from 24 Indonesian Islamic banks’ annual reports from 2016 to 2018. Findings This study found that the number of Sharia supervisory boards, board commissioners’ meetings, board quality, incentive and compensation significantly and positively affected Islamic banks’ growth in Indonesia. Meanwhile, board independence was significant but negatively impacted Indonesian Islamic banks’ growth. Research limitations/implications This study contributes to enhancing the growth of Islamic banks in Indonesia and helps find the solution to Islamic banks’ problems. Hence, this study contributes to Islamic banks’ literature and banking policies, stakeholders, regulators and government. Originality/value Most studies have examined the growth of Islamic banking only from the financial and economic perspectives, while studies undertaken from the perspective of organisational growth and governance are still limited.