Shariah-Compliant Governance and Corporate Financial Sustainability: A Critical Review of Theory and Evidence (International Journal of Islamic Business)

Summary

• This systematic literature review synthesizes 59 peer-reviewed articles published between 2020 and 2025 on Shariah governance and corporate financial sustainability.p.1
• The total assets of Islamic banks, capital markets and takaful companies exceed USD 3 trillion.p.2
• The search identified 117 articles for screening, of which 59 were included.p.7
• Studies focus on Malaysia (n = 18), Indonesia (n = 14), GCC countries (n = 16) and multi-country samples (n = 11).p.8
• Most studies are quantitative (n = 51, 86.4%), against qualitative (n = 5, 8.5%) and mixed-methods (n = 3, 5.1%).p.8
• Evidence shows a significant positive direct effect of Shariah-compliant governance on corporate financial sustainability, depending on its level.p.8

Key insights

1. Shariah-compliant governance positively affects financial sustainability, but effects vary by composition, context and research design.p.1
2. A meta-analysis of 46 studies found that SSB meetings and member qualifications positively contributed to Islamic bank performance.p.3
3. Using data from 20 countries, one study indicates that a larger Shariah supervisory board enhances bank performance.p.3
4. Recent research has shifted from financial ratios toward Maqasid al-Shariah based performance measures.p.4
5. Only two studies used meta-analysis, suggesting room for quantitative synthesis.p.8
6. The governance-performance relationship is stronger for Islamic banks than for takaful operators or non-financial firms.p.9
7. The review recommends mandatory and uniform Shariah governance disclosures, since voluntary disclosure leads to erratic results.p.11
8. Policymakers should consider minimum SSB qualification and independence requirements.p.12