Factors Affecting Profit Distribution Management of Islamic Banks: Moderating Role of Corporate Governance

Abstract

This study aimed to ascertain the factors that affect the Profit Distribution Management (PDM) practices employed by Islamic banks (IBs) to retain their market share. It further analysed whether the presence of Islamic corporate governance can smoothen the profit sharing mechanism followed by the IBs. The study utilized the panel data analysis technique to analyse the data collected from 40 full-fledged IBs for the period 2010-2017 from three different regions, that is, South Asia, Middle East and South East Asia. The findings of the study support the premise that third party funds, asset composition, capital adequacy and market share all have a significant and positive impact on the PDM practices of IBs. Moreover, Islamic corporate governance strengthens the relationship between market share and the PDM practices of IBs. The results of this study have policy implications for the regulators of IBs and financial institutions as they provide insight into the factors that affect the PDM practices of IBs.