Title

The nexus of sustainability practices and financial performance: a perspective of Asian Islamic banks

Submission Type

Paper Presentation

Abstract/Description

This study examined the nexus of sustainability practices and the financial performance of Asian Islamic Banks. For this purpose, this study selected the 23 Islamic banks from the six Muslim countries in the Asian region. The data is collected from annual reports of Asian Islamic banks using the weighted content analysis method for the decade 2009 to 2018. In the relationship between sustainability practices and financial performance, there is an endogeneity problem. When we ignore the endogeneity problem there will be biased results. Due to the endogeneity problem this study used the Generalized Method of Moment (GMM) for Empirical testing. From the results of GMM found that the relation of sustainability practices and financial performance of Asian Islamic banks is positive and significant measured for the management, Shareholder’s and Market perspective. The relation of sustainability practices and overall financial performance as Islamic financial index is positive and significant. These results imply that there are encouragement and motivation for the management, shareholders and market to invest more in sustainability practices for getting a higher return. These results may provide insights for several policymakers of the Islamic banking industry about integrating vital sustainability practices in their business models. It provides a roadmap to the Islamic banking industry for efficient management of sustainability practices from an Islamic perspective and subsequently improvement of financial performance through it.

Session Chair

Dr. Aishath Muneeza, Associate Professor, INCEIF, Malaysia

Session Host

Mr. Muhammad Raza, Customer Support & General Services, Meezan Bank Limited

Start Date

30-5-2022 5:15 PM

End Date

30-5-2022 5:30 PM

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May 30th, 5:15 PM May 30th, 5:30 PM

The nexus of sustainability practices and financial performance: a perspective of Asian Islamic banks

This study examined the nexus of sustainability practices and the financial performance of Asian Islamic Banks. For this purpose, this study selected the 23 Islamic banks from the six Muslim countries in the Asian region. The data is collected from annual reports of Asian Islamic banks using the weighted content analysis method for the decade 2009 to 2018. In the relationship between sustainability practices and financial performance, there is an endogeneity problem. When we ignore the endogeneity problem there will be biased results. Due to the endogeneity problem this study used the Generalized Method of Moment (GMM) for Empirical testing. From the results of GMM found that the relation of sustainability practices and financial performance of Asian Islamic banks is positive and significant measured for the management, Shareholder’s and Market perspective. The relation of sustainability practices and overall financial performance as Islamic financial index is positive and significant. These results imply that there are encouragement and motivation for the management, shareholders and market to invest more in sustainability practices for getting a higher return. These results may provide insights for several policymakers of the Islamic banking industry about integrating vital sustainability practices in their business models. It provides a roadmap to the Islamic banking industry for efficient management of sustainability practices from an Islamic perspective and subsequently improvement of financial performance through it.