The Influence of Sharia Corporate Governance on Financial Performance of Islamic Commercial Banks in Indonesia

Melida Sari; Isni Andriana; Muizzuddin

doi:10.60076/ijeam.v2i4.1638

Authors

Melida Sari Universitas Sriwijaya
Isni Andriana Universitas Sriwijaya
Muizzuddin Universitas Sriwijaya

DOI:

https://doi.org/10.60076/ijeam.v2i4.1638

Keywords:

Sharia Corporate Governance, Transparency, Accountability, Responsibility, Independence

Abstract

This study aims to analyze and test the influence of Sharia Corporate Governance (SCG) on the financial performance of Islamic commercial banks in Indonesia during the 2020-2024 period. The SCG principles in this study consist of transparency, accountability, responsibility, independence, fairness, and the role of the Sharia Supervisory Board (SSB). This study uses a quantitative method with a content analysis approach to the annual reports of Islamic commercial banks registered with the Financial Services Authority (OJK). The study population includes all Islamic commercial banks in Indonesia, with a purposive sampling technique, resulting in 13 Islamic banks as observation samples. Data were analyzed using multiple linear regression to test the influence of each SCG variable on financial performance, proxied by Return on Assets (ROA). The results showed that the SCG variables simultaneously had a significant effect on the financial performance of Islamic commercial banks. Partially, the SCG variables proxied by transparency, accountability, independence, and fairness had a significant effect on financial performance, while the SCG variables proxied by responsibility and SSB did not have a significant effect on financial performance. These results indicate that the effective implementation of SCG principles is able to increase legitimacy and public trust, which ultimately has an impact on improving the financial performance of Islamic commercial banks in Indonesia

References

I. S. Kaomaneng, H. Gamaliel, J. Morasa, and R. Lambey, Good Corporate Governance in the Public Sector, Sumedang: CV Mega Press Nusantara, 2023, 120 pp.

A. I. Raharjanti and R. S. Muharrami, “The effect of good corporate governance and Islamicity financial performance index on internal fraud of sharia banking period 2014-2017,” J. Business Management Review, vol. 1, no. 1, pp. 61-75, 2020. https://doi.org/10.47153/jbmr.v1i1.13

F. C. Ukhriyawati, T. Ratnawati, and S. Riyadi, “The influence of asset structure, capital structure, risk management, and good corporate governance on financial performance and firm value through earnings and free cash flow as intervening variables in banking companies listed in Indonesia Stock Exchange,” Int. J. Business Manage., vol. 12, no. 8, p. 249, 2022. https://doi.org/10.5539/ijbm.v12n8p249

I. Purwanto, I. Bustaram, Subhan, and Z. Risal, “The effect of good corporate governance on financial performance in conventional and Islamic banks: An empirical study in Indonesia,” J. Accounting, Manage. & Digital Business, vol. 2, no. 1, pp. 1-6, 2023. https://doi.org/10.37676/jambd.v2i1.3597

A. Lathifah and Y. Nasution, “The influence of good corporate governance (GCG), corporate social responsibility (CSR), and company size on company financial performance,” USNI Manage. J., vol. 10, no. 2, pp. 43-55, 2025.

B. D. Pura and M. Z. Hamzah, “Analysis of the influence of good corporate governance on the financial performance of banks listed on the Indonesia Stock Exchange for the 2014–2017 period,” in Proc. Seminar Nasional Ekonomi & Bisnis, 2020

D. A. Alia and F. D. Riyanto, “Analysis of the comparison of bank financial performance before and after the merger on company value (case study on Bank BSI and Bank Islam Malaysia Berhad),” Indonesian Interdiscip. J. Sharia Econ. (IIJSE), vol. 8, no. 2, pp. 2987-3003, 2025.

M. L. Widyanto, Y. D. Alfia, S. Kurniawati, and M. Marhalinda, “Comparative analysis of bank performance between Bank Syariah Indonesia (private-shariah) and Bank Central Asia (private-conventional) period of 2021 and 2022,” East Afr. Scholars J. Econ., Bus. Manage., vol. 7, no. 8, pp. 305-323, 2024. https://doi.org/10.36349/easjebm.2024.v07i08.002

M. R. B. and A. Fitriana, “Proceedings of the 1st International Seminar on Sharia, Law and Muslim Society (ISSLAMS 2022),” in Proc. 1st Int. Seminar Sharia, Law & Muslim Society (ISSLAMS 2022), vol. 1, Atlantis Press SARL, 2022. https://doi.org/10.2991/978-2-494069-81-7

A. Permatasari, A. Syathiri, and L. Fuadah, “The influence of Islamic corporate governance (ICG) and Islamic corporate social responsibility (ICSR) on the financial performance of Islamic commercial banks in Indonesia,” [J. not specified], pp. 1-23, 2022.

D. Fatmawati, N. M. Ariffin, N. H. Z. Abidin, and A. Z. Osman, “Shariah governance in Islamic banks: practices, practitioners, and praxis,” Global Finance J., vol. 51, art. no. 100555, 2022. https://doi.org/10.1016/j.gfj.2020.100555

R. Krisyadi and A. Anita, “The effect of corporate social responsibility disclosure, family ownership, and corporate governance on tax avoidance,” Owner: Riset dan J. Akuntansi, vol. 6, no. 1, pp. 416–425, 2022. https://doi.org/10.33395/owner.v6i1.599

A. B. Sulistiyo, S. M. Wardayati, A. Hidayatullah, and S. S. N. Riesky, “Effect of Islamic corporate governance on customer trust: empirical study on Islamic banks,” Asian J. Islamic Manage. (AJIM), vol. 2, no. 1, pp. 12–24, 2020. https://doi.org/10.20885/ajim.vol2.iss1.art2

A. Musah and M. Y. Adutwumwaa, “The effect of corporate governance on financial performance of rural banks in Ghana,” Int. J. Finance, Accounting, Manage., vol. 2, no. 4, pp. 305–319, 2021. https://doi.org/10.35912/ijfam.v2i4.336

H. Mukhibad, M. R. Rochmatullah, W. Warsina, R. Rahmawati, and D. Setiawan, “Islamic corporate governance and performance based on the maqasid sharia index – study in Indonesia,” J. Siasat Bisnis, vol. 24, no. 2, pp. 114–126, 2020. https://doi.org/10.20885/jsb.vol24.iss2.art2

A. M. Sembiring, N. Ahmadi, and B. Rahmani, “The effect of financial inclusion on the stability of Islamic banking in Indonesia using the generalized least square method,” J. Akuntansi, Keuangan, Audit (AKUA), vol. 4, no. 2, pp. 189–202, 2025. https://doi.org/10.54259/akua.v4i2.4304

M. Bastomi, U. Salim, and S. Aisjah, “The role of corporate governance and risk management on banking financial performance in Indonesia,” J. Keuangan dan Perbankan, vol. 21, no. 4, pp. 692–706, 2020. https://doi.org/10.26905/jkdp.v21i4.1285

Y. Armayanti, “The influence of the sharia supervisory board, board of directors size, and audit committee on sharia banking performance,” Qonun Iqtishad El-Madani J., 2024.

W. Purwanto et al., “Analysis of the impact of good corporate governance and bank fundamentals on the financial performance of banking institutions on the Indonesian Stock Exchange (BEI),” Res. J. Finance Account., vol. 6, no. 8, pp. 1–7, 2022. [Online]. Available: www.iiste.org.

M. Darmawan, M. R. Hafizi, and A. Geovani, “The influence of good corporate governance on the financial performance of Islamic banks in Indonesia,” J. Cendekia Keuangan, vol. 3, no. 1, pp. 47–60, 2024. https://doi.org/10.32503/jck.v3i1.4967

V. Nurhidayah, “The influence of good corporate governance on financial performance in banking at the IDX,” J. Accounting Student Res., vol. 1, no. 2, pp. 132–142, 2020.

S. Romadhonia and S. L. Kurniawati, “The effect of Islamic corporate governance, sharia compliance, and Islamic social responsibility on the profitability of sharia banks,” Sharia Econ.: J. Econ. Stud., vol. 6, no. 1, pp. 90–102, 2022. https://doi.org/10.30983/es.v6i1.556

A. Eksandy, “The effect of good corporate governance on financial performance in Indonesian Islamic banking,” J. Akuntansi: Kajian Ilm. Akuntansi (JAK), vol. 5, no. 1, pp. 1–12, 2020. https://doi.org/10.30656/jak.v5i1.498

M. Anggreni, I. Novianty, and M. Muflih, “The influence of the audit committee, board of directors, and sharia supervisory board on the financial performance of Islamic banking: estimation of the direct effect and role of I-Economics,” I-Economics: J. Ilmu Ekonomi Islam, vol. 8, no. 2, pp. 212–225, 2022.

M. C. Suchman, “Managing legitimacy: strategic and institutional approaches,” Acad. Manage. Rev., vol. 20, no. 3, pp. 571–610, 1995. https://doi.org/10.2307/258788

R. A. Asmara, W. Hariyanti, and A. E. Suseno, “The influence of good corporate governance on banking financial performance period 2016–2020,” Accounting Finance Stud., vol. 2, no. 3, pp. 141–156, 2022. https://doi.org/10.47153/afs23.4372022