DOES POLITICAL CONNECTION REDUCE SHARIA NONCOMPLIANCE RISK? EVIDENCE OF INDONESIAN VS MALAYSIAN ISLAMIC BANKS

• Main Author: RIZKIA SYAPUTR (29016005), ANNISA
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/25680
• Institution: Institut Teknologi Bandung

One of the characteristics that distinguishes Islamic Banks from Conventional Banks <br /> <br /> is the principle used in carrying out their activities. Islamic Law or Islamic principles <br /> <br /> become the foundation of Islamic Banks thus the role of the Sharia Supervisory Board <br /> <br /> (SSB) is needed. The Sharia Supervisory Board is required as a supervisory function <br /> <br /> and advisory function with the aim of ensuring that activities carried out are in <br /> <br /> accordance with Sharia principles because there is a possibility or risk of noncompliance <br /> <br /> with Sharia principles which is then called Sharia non-compliance risk. <br /> <br /> The Sharia Supervisory Board enters into the governance of Islamic Banks and <br /> <br /> occupies an equal position with the Board of Commissioners which has a supervisory <br /> <br /> function regarding Islamic Law. In addition, governance is also widely associated with <br /> <br /> political connections. This study aims to determine the effect of political connections <br /> <br /> and governance on the risk of non-compliance with Islamic principles in Indonesia and <br /> <br /> Malaysia. Islamic banks in these two countries are subject to research because of the <br /> <br /> significant differences in the development of Islamic banks but have similar <br /> <br /> characteristics in society. This study uses linear regression with sharia non-compliance <br /> <br /> as an observed variable and it is found that in Indonesian Islamic banks, the political <br /> <br /> connection able to reduce sharia non-compliance risk whilst in Malaysia we did not <br /> <br /> found any statistically significant.