Corporate governance and corporate social responsibility in financial institutions: Evidence from Islamic banks

Islamic banks play a significant role in the financial sector in a number of emerging markets especially countries with a large Muslim population. The objectives of Islamic banks are fundamentally different from those of conventional banks.While conventional banks seek to maximize their shareholders wealth, Islamic banks primarily strive to achieve a balance between providing sufficient Shari’ah compliant returns and their social responsibilities to various stakeholders. Moreover, Islamic banks are characterized by multiple agency relationships. I analyze the corporate governance characteristics of a sample of Islamic banks in six emerging countries and their corporate social responsibility (CSR) as these two aspects are increasingly related. I identify areas of interest through mini case studies and examples. Finally, I conclude by considering the likely future development of corporate governance and CSR in Islamic banks in emerging markets.