Do corporate and Sharia compliance governance affect enterprise risk management implementation?

Yang Elvi Adelina, Teddy Trilaksono, Rosdiana Rohi-Mone

Abstract


The growth of Sharia banking assets in Indonesia greatly influenced by the scalability of Sharia banking businesses, which is supported by an increase in good corporate governance. The banking industry in general functions very closely with risk. This means that banks acutely need a risk-based management approach that is now being developed by the regulator with an integrated approach through Enterprise Risk Management (ERM). Other specific aspects of governance in Sharia banking include governance for compliance with Sharia aspects (Sharia compliance governance). The method used in this study is multiple regression analysis. We intended to examine the influence of general and Sharia governance mechanisms that exist in Indonesian Sharia banking with the level of ERM implementation. We indicated that the presence of the risk management committee, independent audit committee, and Sharia compliance audits positively and significantly affect ERM implementation. This study expected to be beneficial especially to provide input on governance policies for both banks and regulators.

JEL Classification: G29, G30

 

How to Cite:

Adelina, Y. E., Trilaksono, T., & Rohi-Mone, R. (2020). Do corporate and Sharia compliance governance affect the enterprise risk management implementation?Jurnal Keuangan dan Perbankan, 24(1), 1-19.

DOI: https://doi.org/10.26905/jkdp.v24i1.3768


Keywords


Corporate governance; Enterprise Risk Management; Indonesia; Islamic banking; Sharia compliance governance

Full Text:

PDF

References


Alkdai, H. K. H., & Hanefah, M. M. (2012). Audit committee characteristics and earnings management in Malaysian Shariah-compliant companies. Business & Management Review, 2(2), 52–61.

Al-Maghzom, A., Hussainey, K., & Aly, D. (2016). Corporate governance and risk disclosure: Evidence from Saudi Arabia. Corporate Ownership and Control, 13(2), 145–166. https://doi.org/10.22495/cocv13i2p14

Anggani, Y. T., & Widagdo, A. K. (2019). Intellectual capital performance of Sharia banks: Evidence from Indonesia. Jurnal Keuangan dan Perbankan, 23(4), 579–594. https://doi.org/10.26905/jkdp.v23i4.3563

Chariri, A., Januarti, I., & Yuyetta, E. N. A. (2017). Firm characteristics, audit committee, and environmental performance: Insights from Indonesian companies. International Journal of Energy Economics and Policy, 7(6), 19–26.

Chen, Y. L., Chuang, Y. W., Huang, H. G., & Shih, J. Y. (2019). The value of implementing enterprise risk management: Evidence from Taiwan’s financial industry. North American Journal of Economics and Finance, xxxx, 1–14. https://doi.org/10.1016/j.najef.2019.02.004

Financial Service Authority (Otoritas Jasa Keuangan). (2009). Circular Letter of Bank Indonesia No. 11/33/PBI/2009. Pelaksanaan Good Corporate Governance bagi Bank Umum Syariah dan Unit Usaha Syariah.

Financial Service Authority (Otoritas Jasa Keuangan). (2010). Circular Letter of Bank Indonesia No. 12/13/DPbS. Pelaksanaan Good Corporate Governance bagi Bank Umum Syariah dan Unit Usaha Syariah.

Desender, K. A. (2010). On the determinants of enterprise risk management implementation. In Enterprise IT Governance, Business Value and Performance Measurement. https://doi.org/10.4018/978-1-60566-346-3.ch006

Desender, K. A., & Lafuente, E. (2011). The influence of board composition, audit fees and ownership concentration on enterprise risk management. SSRN Electronic Journal, January. https://doi.org/10.2139/ssrn.1495856

Dewany, F. W. (2015). Analysis of the effect of GCG quality on the financial performance of Islamic banks. The Indonesian Accounting Review, 5(2), 119. https://doi.org/10.14414/tiar.v5i2.642

Elamer, A. A., Ntim, C. G., & Abdou, H. A. (2017). Islamic governance, national governance, and bank risk management, and disclosure in MENA Countries. Business & Society, 1–42. https://doi.org/10.1177/0007650317746108

Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. Journal of Law and Economics, 26, 327–335. https://doi.org/10.2139/ssrn.94032

Farag, H., Mallin, C., & Ow-Yong, K. (2018). Corporate governance in Islamic banks: New insights for dual board structure and agency relationships. Journal of International Financial Markets, Institutions and Money, 54, 59-77. https://doi.org/10.1016/j.intfin.2017.08.002

Ginena, K. (2014). Sharī‘ah risk and corporate governance of Islamic banks. Corporate Governance (Bingley), 14(1), 86–103. https://doi.org/10.1108/CG-03-2013-0038

Global Islamic Financial Report. (2019). Islamic Financial Country Index.

Grassa, R., & Matoussi, H. (2014). Corporate governance of Islamic banks A comparative study between GCC and Southeast Asia countries. https://doi.org/10.1108/IMEFM-01-2013-0001

Gujarati, D. N., & Porter, D. C. (2009). Basic Econometrics. 5th Edition.. McGraw-Hill.

Hamza, H. (2013). Sharia governance in Islamic banks: effectiveness and supervision model. International Journal of Islamic and Middle Eastern Finance and Management, 6(3), 226–237. https://doi.org/10.1108/IMEFM-02-2013-0021

Handayani, B., & Yanto, H. (2013). Determinan pengungkapan enterprise risk management. Jurnal Keuangan dan Perbankan, 17(3), 333–342.

Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 7(3), 281–312. https://doi.org/10.1177/1536867x0700700301

Hoyt, R. E., & Liebenberg, A. P. (2011). The value of enterprise risk management. Journal of Risk and Insurance, 78(4), 795–822. https://doi.org/10.1111/j.1539-6975.2011.01413.x

Husaini, Saiful, Fadli, A., & Aisyah, S. (2013). Corporate governance and enterprise risk management: An empirical evidence from the unique two-tier boards system of Indonesian public listed companies. World Business and Social Sciencces Research Conference 24-25, 1–12.

Islamic Financial Services Board. (2009). Guiding Principles on Shariah Governance Systems for Institutions offering Islamic Financial Services. Pub. L. No. IFSB-10.

Jia, J., Li, Z., & Munro, L. (2019). Risk management committee and risk management disclosure: evidence from Australia. Pacific Accounting Review, 31(3), 438–461. https://doi.org/10.1108/PAR-11-2018-0097

Karyani, E., Dewo, S. A., Santoso, W., & Frensidy, B. (2019). Risk governance and bank profitability in ASEAN-5: a comparative and empirical study. International Journal of Emerging Markets. https://doi.org/10.1108/IJOEM-03-2018-0132

Lechner, M., Rodriguez-Planas, N., & Kranz, D. F. (2016). Difference-in-difference estimation by FE and OLS when there is panel non-response. Journal of Applied Statistics, 43(11), 2044–2052. https://doi.org/10.1080/02664763.2015.1126240

Lusk, E. J., Halperin, M., & Heilig, F. (2011). A note on power differentials in data preparation between trimming and winsorizing. Business Management Dynamics, 1(2), 23–31.

Magalhães, R., & Al-Saad, S. (2013). Corporate governance in Islamic financial institutions: The issues surrounding unrestricted investment account holders. Corporate Governance (Bingley), 13(1), 39–57. https://doi.org/10.1108/14720701311302404

Maruhun, E. N. S., Abdullah, W. R. W., Atan, R., & Yusuf, S. N. S. (2018). The effects of corporate governance on enterprise risk management: Evidence from Malaysian Shariah-compliant firms. International Journal of Academic Research in Business and Social Sciences, 8(1). https://doi.org/10.6007/ijarbss/v8-i1/3893

Meizaroh, & Lucyanda, J. (2011). Pengaruh corporate governance dan konsentrasi kepemilikan pada pengungkapan enterprise risk management. Simposium Nasional Akuntansi XIV - Banda Aceh.

Mollah, S., & Zaman, M. (2015). Shari’ah supervision, corporate governance and performance: Conventional vs. Islamic banks. Journal of Banking and Finance, 58, 418–435. https://doi.org/10.1016/j.jbankfin.2015.04.030

Neifar, S., & Jarboui, A. (2018). Corporate governance and operational risk voluntary disclosure: Evidence from Islamic banks. Research in International Business and Finance, 46(146), 43–54. https://doi.org/10.1016/j.ribaf.2017.09.006

Nugraheni, P. (2018). Sharia supervisory board and social performance of Indonesian Islamic banks. Jurnal Akuntansi & Auditing Indonesia, 22(2), 137–147. https://doi.org/10.20885/jaai.vol22.iss2.art6

Peraturan Otoritas Jasa Keuangan. (2016). Tentang Pembentukan dan Pedoman Pelaksanaan Kerja Komite Audit.

Peraturan Otoritas Jasa Keuangan. (2016). Tentang Penerapan Manajemen Risiko Bagi Bank Umum Syariah Dan Unit Usaha Syariah.

Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A Resource dependence perspective. 1st Edition. Standford University Press.

Rahma, N. N., & Almilia, L. S. (2018). The effect of public ownership, risk management committee, bank size, leverage, and board of commissioners on risk management disclosures (Empirical study in banking sector companies listed on the Indonesia Stock Exchange for the period 2011-2015). The Indonesian Accounting Review, 8(1), 12. https://doi.org/10.14414/tiar.v8i1.1577

Rasid, S. Z. A., Isa, C. R., & Ismail, W. K. W. (2014). Management accounting systems, enterprise risk management and organizational performance in financial institutions. Asian Review of Accounting, 22(2), 128–144. https://doi.org/10.1108/ARA-03-2013-0022

Safiullah, M., & Shamsuddin, A. (2018). Risk in Islamic banking and corporate governance. Pacific Basin Finance Journal, 47(October 2017), 129–149. https://doi.org/10.1016/j.pacfin.2017.12.008

Safiullah, M., & Shamsuddin, A. (2019). Risk-adjusted efficiency and corporate governance: Evidence from Islamic and conventional banks. Journal of Corporate Finance, 55(February 2018), 105–140. https://doi.org/10.1016/j.jcorpfin.2018.08.009

Salloum, C., Azzi, G., & Gebrayel, E. (2014). Audit committee and financial distress in the Middle East context: evidence of the Lebanese financial institutions. International Strategic Management Review, 2(1), 39–45. https://doi.org/10.1016/j.ism.2014.09.001

Scwab, K. (2018). The Global Competitiveness Index Report 2017-2018. In World Economic Forum (Issue 31). Retrieved from: http://ci.nii.ac.jp/naid/110008131965/

Sihombing, J., & Pangaribuan, H. (2017). A study of corporate governance structure, disclosure and information asymmetry in Indonesia banking industry. Jurnal Akuntansi, 21(2), 156. https://doi.org/10.24912/ja.v21i2.192

Sugiyono. (2010). Metode Penelitian Pendidikan Pendekatan Kuantitatif, kualitatif, dan R&D. Alfabeta.

The Banker. (2019). The Banker’s Top Islamic Financial Institutions. Retrieved from: https://www.thebanker.com/Reports/The-Banker-s-Top-Islamic-Financial-Institutions-2019

Uzliawati, L., Suhardjanto, D., & Djati, K. (2012). Critical Success Factors (CSFs) for TQM Implementation: Current Status and Challenges in Libyan Manufacturing Companies. GSTF Journal on Business Review, 2(1), 71–79. https://doi.org/10.5176/2010-4804

Waweru, N. M., & Kisaka, E. S. (2012). The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed in the Nairobi Stock Exchange. SSRN Electronic Journal, 3(3), 81–105. https://doi.org/10.2139/ssrn.1907248

Wintoki, M. B., Linck, J. S., & Netter, J. M. (2012). Endogeneity and the dynamics of internal corporate governance. Journal of Financial Economics, 105(3), 581–606. https://doi.org/10.1016/j.jfineco.2012.03.005

Zadeh, F. O., Rasid, S. Z. A., Basiruddin, R., Zamil, N. A. M., & Vakilbashi, A. (2016). Risk disclosure practices among Malaysian listed firms. International Journal of Economics and Financial Issues, 6(3), 1092–1096.




DOI: https://doi.org/10.26905/jkdp.v24i1.3768

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 813-3180-1534
Email: jkp@unmer.ac.id

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0