Determinants of compliance with AAOIFI standards by Islamic banks

Sherif El-halaby, Khaled Hussainey

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Purpose: We explore the level and determinants of compliance with Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) financial and governance standards by Islamic banks (IBs).

Methodology: Our sample consists of 43 IBs across 8 countries. We use ordinary least squares regression analyses to examine the impact of Bank-specific characteristics and corporate governance mechanisms concerned with Board of Directors (BOD) and Sharia Supervisory Board (SSB) on levels of compliance with AAOIFI standards.

Findings: We find that the average compliance level based on AAOIFI standards concerning the Sharia Supervisory Board Report (SSBR) is 68%; corporate social responsibility report (CSRR) is 27% and presentation of financial statements (FS) is 73%. The aggregate disclosure based on the 3 indices is 56%. The analysis also shows that size, existing Sharia auditing department, age, and corporate governance of SSB are the main determinants of compliance levels.

Originality: he determinants of compliance with AAOIFI standards for IBs around the world not been explored before and, therefore, this paper is the first of its kind to this issue.
Original languageEnglish
Pages (from-to)143-168
JournalInternational Journal of Islamic and Middle Eastern Finance and Management
Issue number1
Publication statusPublished - 18 Apr 2016


  • determinants
  • Islamic banking
  • AAOIFI standards
  • compliance and non-compliance
  • cross-country


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