The role of Islamic corporate governance in enhancing social and financial performance: evidence from Indonesia’s Islamic bank sector

Retno Yuni Nur Susilowati; Liza Alvia; Ayu Dwiny Octary; Syaharani Noer Fathia; Nafa’a ‘Ainayya

doi:10.21580/jiafr.2026.8.2.28288

Authors

Retno Yuni Nur Susilowati Universitas Lampung, Bandar Lampung, Indonesia https://orcid.org/0000-0002-7119-942X
Liza Alvia Universitas Lampung, Bandar Lampung, Indonesia https://orcid.org/0009-0004-7142-7017
Ayu Dwiny Octary Universitas Lampung, Bandar Lampung, Indonesia https://orcid.org/0009-0004-8935-7782
Syaharani Noer Fathia Universitas Lampung, Bandar Lampung, Indonesia
Nafa’a ‘Ainayya Al-Azhar University, Cairo, Egypt

DOI:

https://doi.org/10.21580/jiafr.2026.8.2.28288

Keywords:

Islamic corporate governance, Financial performance, Social performance, Financial stability, Sharia board

Abstract

Purpose - This study examines how Islamic corporate governance affects the social and financial performance of Islamic banks in Indonesia.

Method - The study uses panel regression on time-series and cross-sectional data from Indonesian Islamic banks. Four ICG proxies are used: independent sharia board, sharia board size, sharia board competence, and sharia board gender. Social and financial performance are measured by corporate social responsibility disclosure and return on assets, respectively. Financial stability is included as a moderating variable. Analysis is conducted in Stata 17.

Result - The results show that certain ICG dimensions significantly influence both social and financial performance. Additionally, financial stability amplifies ICG's positive impact on performance, underscoring the importance of a stable financial environment for enhancing governance effectiveness.

Implication - The findings offer meaningful insights into governance mechanisms and inform policy on strengthening Sharia board roles within Islamic financial institutions.

Originality - This study is among the first to incorporate financial stability as a moderating variable in the ICG-performance relationship in Indonesia.

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