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Impact of Audit Committee Effectiveness on Malaysian Takaful Performance, and Moderating Role of Shariah Committee Quality

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Explore Business, Technology Opportunities and Challenges ‎After the Covid-19 Pandemic (ICBT 2022)

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Abstract

This paper examines the impact of the audit committee’s effectiveness (ACE) on the performance of Malaysian Takaful companies licensed by the Central Bank of Malaysia. In addition, this study investigates the moderator role of Shariah Committee Quality (SCQ) on the relationship between ACE and performance. The study uses a sample of 11 Malaysian Takaful from 2010 to 2017. Performance is proxied using return on assets and return on equity, while ACE is measured via four attributes, mainly audit committee (AC) chairman specialization, size, independence, and meeting. Furthermore, SCQ is quantified via an index based on six attributes. To answer our research questions, a panel fixed effect regression is used. Our results show that ACE positively affects performance. At the individual level, a larger and more independent audit committee positively related to performance of Malaysian Takaful companies. However, AC meeting and chairperson specialization do not affect performance. Moreover, Shariah Committee Quality positively moderates the relationship between ACE and Malaysian Takaful companies. Results provision the important role played by AC in boosting performance. Our findings are of great importance to Malaysian regulators to enhance the existing corporate governance effectiveness by directing Takaful companies to establish robust and high-quality audit and Shariah committees. This research provides a new understanding regarding AC as a component of CG and its relationship with performance. This study is supposed to fill the gap in corporate governance by testing the impact of AC effectiveness on performance and its implementation in Malaysia especially in the Takaful sector. Besides, this study brings additional evidence of the influence of AC on performance, which is moderated by SCQ.

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Authors and Affiliations

  1. Faculty of Business Administration and Finance, Al-Aqsa University, Gaza, Palestine

    Monther Eldaia

  2. Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800, Nilai, Negeri Sembilan, Malaysia

    Mustafa Hanefah

Authors
  1. Monther Eldaia
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  2. Mustafa Hanefah
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Correspondence to Monther Eldaia .

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  1. Northern Cyprus Campus, R-141 , KKTC, Middle East Technical University, Kalkanli, Güzelyurt, Turkey

    Bahaaeddin Alareeni

  2. Col of Business & Finance, Building 41, Ahlia University, Manama, Bahrain

    Allam Hamdan

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Eldaia, M., Hanefah, M. (2023). Impact of Audit Committee Effectiveness on Malaysian Takaful Performance, and Moderating Role of Shariah Committee Quality. In: Alareeni, B., Hamdan, A. (eds) Explore Business, Technology Opportunities and Challenges ‎After the Covid-19 Pandemic. ICBT 2022. Lecture Notes in Networks and Systems, vol 495. Springer, Cham. https://doi.org/10.1007/978-3-031-08954-1_65

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  • DOI: https://doi.org/10.1007/978-3-031-08954-1_65

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