Sharia Supervisory Board, Maqāṣid al-Sharīʿah, and Financial Performance: Evidence from Islamic Banks

Marheni; Doddy Setiawan; Falikhatun; Lulus Kurniasih

doi:10.15575/am.v13i2.54632

Sharia Supervisory Board, Maqāṣid al-Sharīʿah, and Financial Performance: Evidence from Islamic Banks

Authors

Marheni Sebelas Maret University https://orcid.org/0009-0009-9155-1011
Doddy Setiawan Sebelas Maret University
Falikhatun Sebelas Maret University
Lulus Kurniasih Sebelas Maret University

DOI:

https://doi.org/10.15575/am.v13i2.54632

Keywords:

Sharia Supervisory Board, Maqāṣid al-Sharīʿah Index, Sharia Governance, Islamic Social Reporting, Financial Performance of Islamic Banking

Abstract

Islamic banking performance is increasingly evaluated not only through conventional financial indicators but also by the achievement of Maqāṣid al-Sharīʿah. However, evidence remains limited on how Sharia Supervisory Board (SSB) characteristics influence financial performance through Maqāṣid achievement, as well as how governance and disclosure mechanisms condition the relationship. Therefore, this study aimed to examine the direct, mediating, and moderating roles of Sharia governance mechanisms using panel data from 45 listed Islamic commercial bank across multiple countries during 2023–2025 (135 observations). The analysis was conducted using Panel Least Squares fixed-effects estimation. The SSB Index was measured across seven dimensions, while financial performance was proxied by the profit-and-loss-sharing (PLS) ratio. Mediation was tested through the Sobel test with bootstrapping (5,000 resamples), and moderation was assessed through interaction terms for Sharia Governance and Islamic Social Reporting (ISR). The results showed that SSB expertise, institutional affiliation, and board size significantly enhanced Maqāṣid achievement. Meanwhile, the Maqāṣid al-Sharīʿah Index strongly and positively affected financial performance and mediated the relationship between key SSB characteristics and outcomes. Sharia Governance and ISR further strengthened this relationship. In conclusion, Islamic banking performance is driven by substantive Sharia supervision and effective internalization of Maqāṣid objectives rather than symbolic governance. This study offers novel evidence that Maqāṣid achievement functions as a strategic, measurable driver of financial performance with implications for SSB competency and disclosure standards.

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