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Original Research Article
The relationship between credit risk and corporate governance in Islamic banking: An empirical study
*Chaouki Bourakba1 and Hadjer Zerargui2
1Department of Banking Faculty of Economics and Administrative Sciences, Al-Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia.
2Department of Insurance, Faculty of Economics and Administrative sciences, Al-Imam Muhammad Ibn Saud Islamic University, Riyadh, Saudi Arabia.
*Corresponding Author E-mail:chawki62000(at)yahoo.fr
Tel.:+966591347071
Article Number: | Pages: | | DOI:
Received: Accepted: April 20, 2015 Published:
Abstract
The study seeks to determine the relationship between the variables, corporate governance and credit risk in Islamic banks. The paper specifically deals with governance in Islamic banks which is two-fold: Anglo-Saxon governance system and Islamic Governance System. The article measures the impact of corporate governance variables on credit risk through an empirical study on a sample of Islamic banks during the period 2005-2012. The study found that there is a very strong relationship between the variables, governance and credit risk of Islamic banks. There is a negative relationship between non-performing loans ratio and the composition of the board of directors, the size of the board of directors, board committees, concentration of ownership, as well as the size of the Sharia supervisory board, while it is clear that there is a positive relationship between non-performing loans ratio and the size of the bank. This evidence provides beneficial information for supervising authorities, stakeholders and academics.
Keywords: Corporate governance, credit risk, Islamic banks.