Title: Culture inclusive Shariah corporate governance as a risk mitigation tool in Islamic banks

Authors: Jawahitha Sarabdeen

Addresses: Faculty of Business and Management, University of Wollongong in Dubai, P.O. Box 20183, Dubai, United Arab Emirates

Abstract: Best practice of corporate governance is crucial to ensure that the depositors suffer no loss due to negligence or unethical handling of funds. Islamic corporate governance seeks to ensure a fair return on the investment, affirming incentives and procedures that meet the interests of shareholders, while respecting other stakeholders. Understanding cultural norms seems to be crucial in having sound corporate governance. The aims of this research are to analyse the concepts, theories and principles of corporate governance, to seek to link the cultural influence in the adoption of corporate governance and to propose corporate governance principles that could adopt cultural values. In order to analyse the available theories, policies and standard, a comprehensive analysis of a literature review was undertaken. For this purpose, the researcher used content analysis. The finding shows that differences in culture result in different approaches to ownership structure, corporate boards, hostile takeovers and protection of minority shareholders. In addition, three cultural dimensions of collectivism, high power distance and high on uncertainty avoidance are shown to be present in countries where Islamic financial institutions operate, and that could result in weak corporate governance practices.

Keywords: Islamic corporate governance; culture; risk management; Shariah law; Islamic finance; Islamic banks; banking industry; cultural norms; cultural values; ownership structure; corporate boards; hostile takeovers; minority shareholders; collectivism; power distance; uncertainty avoidance.

DOI: 10.1504/IJCG.2016.082350

International Journal of Corporate Governance, 2016 Vol.7 No.4, pp.353 - 376

Accepted: 17 Nov 2016
Published online: 17 Feb 2017 *

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