Islamic banking has grown tremendously for over the last two decades. The development
of Islamic banking is getting more support because able to cater demands of niche
consumers. However, many new risks have emerged along with growth of Islamic
banking such as Shari’ah non-compliance risk. This is due to poor supervision, weak
governance and lacking in disclose information especially in non-compliant events.
Islamic bank should ensure that every activity, transaction, and process in daily operation
must adhere to Shari’ah rulings. These problems such lacking in disclose information,
poor supervision and weak governance may give impact to the organizations. The
purpose of this study is to know the extent of effect of Shari’ah governance disclosure
towards financial performance in Islamic banking. This study focused on countries of
Malaysia and the Gulf Cooperation Council (GCC) with 35 Islamic banks as sample size.
Secondary data is used and collected from annual report for period 2016 until 2018 using
checklist developed from Shari’ah governance framework. The checklist consists of five
(5) mechanisms that are important to ensure quality of disclosure and Shari’ah
compliance in Islamic banking. Return on asset (ROA) as the tool to measure financial
performance. This study also used multiple regression analysis to answer the research
question. This study found that only Shari’ah Committee and Shari’ah risk has significant
impact on financial performance. Both mechanisms play important roles in ensuring
compliance for Islamic banking in Malaysia and the GCC countries.
