Mar 1, 2018 - Murabahah (sales with markup and differed payment) Ijarah (leasing) and many others. (Ghayad .... as managerial characteristics. She claims ...
Exploring the effects of Guidelines for Governance of Banks (GGB) upon Yemeni Islamic Banks: The Case of Shamil Bank of Yemen & Bahrain
Dissertation submitted to the University of Liverpool in partial fulfillment for the degree of Master of Business Administration
By Ahmed Bazara Student ID: H00022771 Advisor: Dr. Eshani Beddewela March 2018
Word count 20689
Certification Statement
2
Abstract This dissertation describes the results of a research study into the implications of applying the recent Guidelines for the Governance of Banks (GGB) in Yemen to the banking sector, using the Shamil Bank of Yemen & Bahrain (SBYB) as a case study. Under guidelines issued by the Central Bank of Yemen in 2014, all banks must ensure that they comply with a broad range of corporate governance requirements covering areas such as the formation of board committees and risk management. While the breadth of the Guidelines suggests that banks will need to invest considerable time and resources in order to ensure successful implementation, no empirical study to date has assessed the impact that the new guidelines have had upon Yemeni banks operating in Yemen. The purpose of this dissertation is address that gap in the literature. The study explores the probable benefits for the profitability of the bank and difficulties encountered when applying the guidelines. The study also aims at understanding the strategies used to cope with the challenges involved in implementing the GGB. More specifically, the dissertation addresses the personal views and opinions of the board of directors and the senior management of the case study bank in regards to the application and implementation of the Guidelines for the Governance of Banks, the perceived benefits of implementing the GGB, any difficulties and challenges experienced and coping strategies utilized. Data was collected through interviews with nine members of the Board of Directors (BoD) and senior management, at the case study bank, all of whom were male. Although small, it revealed valuable information about their views and opinion of implementing the Guidelines for the Governance of Banks. The findings revealed that implementation of the Guidelines for the Governance of Banks at SBYB is underway with full support from the Board, but has slowed recently, as a result of political upheaval in the country. It also suggested multiple benefits arising from implementation such as improved governance, transparency and supervision and improved bank profitability. However, interviewees outline a number of challenges associated 3
with its implementation, including socio-cultural and political challenges, and challenges associated with acquiring the resources needed to ensure successful execution of the GGB practices.
4
Acknowledgement I would like to thank my Dissertation Advisor Prof. Dr. Eshani Beddewela for the support and guidance provided throughout this journey. She was of great help and assistance whenever I requested. Her valuable comments, criticism and feedback were indispensable and brought about the quality of this work. The University of Liverpool provided much of the resources I needed using its massive library and infrastructure for my thesis not to mention the methods and techniques of research I were taught. Sincere thanks to all respondents who participated in this research and for allocating their precious time. I can’t spell enough words of gratitude and appreciation to my family who supported me over this entire and hectic journey, and without their backing and patience this will not have been conceivable. And finally, all praise be to Allah for His blessing.
5
Table of Contents
Contents Certification Statement ....................................................................................................... 2 Acknowledgement ................................................................................................................ 5 Table of Contents ................................................................................................................. 6 Table of Figures ................................................................................................................... 9 Glossary .............................................................................................................................. 10 Chapter 1 Introduction ..................................................................................................... 11 1.1 Background .......................................................................................................... 11 1.2 The aim of the dissertation ................................................................................. 13 1.3 Research questions .............................................................................................. 13 1.4 Research objectives ............................................................................................. 14 1.5 Overview of Literature ....................................................................................... 14 1.6 Overview of Methodology ................................................................................... 15 1.7 Key findings and Contributions ......................................................................... 15 1.8 Dissertation Structure ......................................................................................... 15 1.9 Chapter Summary ............................................................................................... 16 Chapter 2 Literature Review ............................................................................................ 17 2.1 Introduction to the Chapter ............................................................................. 17 2.2 Corporate Governance ......................................................................................... 18 2.2.1 Defining Corporate Governance ........................................................................... 18 2.2.2 Corporate governance and the agency problem .................................................. 19 2.2.3 Corporate Governance in Yemen ......................................................................... 21 2.3 Islamic Banking ................................................................................................... 22 2.3.1 Corporate Governance in Islamic Financial Institutions ................................... 23 2.3.2 Corporate Governance, the agency problem and performance in Islamic Financial Institutions............................................................................................... 24 2.3.3 Corporate Governance, the agency problem and performance in Yemen ....... 28 2.4 Conceptual Framework ...................................................................................... 29 2.5 Summary of the Chapter ..................................................................................... 31 Chapter 3 Research Methodology and Methods ............................................................ 33 3.1 Introduction to the chapter.................................................................................. 33 3.2 Illustrative flow diagram of Methodology adapted in this work: .................... 33 3.3 Philosophical Framework and Research Paradigm .......................................... 34 6
3.4 Research design: The Case Study Method ........................................................ 36 3.5 Research Approach .............................................................................................. 37 3.6 Research Design .................................................................................................... 38 3.7 Sampling Design ......................................................................................................... 39 3.8 Data Collection Methods...................................................................................... 40 3.8.1 Primary data ............................................................................................................. 40 3.8.2 Secondary data ........................................................................................................ 41 3.9 Data Analysis and Interpretation .............................................................................. 41 3.10 Strategies Adopted for Validating Findings.................................................... 42 3.10.1 Creditability ........................................................................................................... 42 3.10.2 Conformability ...................................................................................................... 42 3.10.3 Transferability ....................................................................................................... 42 3.11 Ethical Considerations ...................................................................................... 42 3.12 Summary of the Chapter .................................................................................. 43 Chapter 4 Data Collection and Data Analysis ................................................................ 45 4.1 Introduction .......................................................................................................... 45 4.2 The Research Sample ........................................................................................... 45 4.2.1 Definition/Conceptualization of the Guidelines for the Governance of Banks ................................................................................................................................... 46
4.3 Implementation of the Guidelines for the Governance of Banks ..................... 47 4.3.1 Initiation of Implementation of the GGB ............................................................ 47 4.3.2 Present status of implementation of the GGB ..................................................... 48 4.3.3 Measures taken to ensure effective implementation and compliance .............. 48 4.4 Benefits and Effectiveness of Implementation of the Guidelines of Governance for Banks .............................................................................................................. 49 4.4.1 Revenue and Profits ................................................................................................ 49 4.4.2 Bank Performance................................................................................................... 50 4.4.3 For Risk Management ............................................................................................ 51 4.4.4 For Stakeholder management ................................................................................ 51 4.4.5 Governance and supervision.................................................................................. 52 4.5 Guidelines for the Governance of Banks (GGB) and Islamic Banking ........... 52 4.5.1 Alignment with Islamic Banking Principals ....................................................... 53 4.5.2 Impact of the GGB on Islamic Financial Institutions ..................................... 53 4.6 Challenges Encountered in the Implementation of the GGB ........................... 54 4.6.1 Relating to the socio-cultural environment ......................................................... 54
7
4.6.2 Political and Financial stability ............................................................................. 55 4.7 Measures or Steps Taken to Overcome the Challenges .................................... 55 4.7.1 To overcome political and socio-cultural challenges ......................................... 56 4.8.1 To ensure effective allocation of resources ......................................................... 56 4.9 Summary of the Chapter ..................................................................................... 57 Chapter 5 Analysis of Data and Discussion of Findings ................................................ 58 5.1 Introduction to the Chapter ................................................................................ 58 5.2 Basic Concepts and Definitions ........................................................................... 58 5.3 Implementation of the Guidelines for the Governance of Banks ..................... 59 5.4 Benefits and Effectiveness of Implementation of the Guidelines for Governance of Banks .......................................................................................... 61 5.5 Guidelines for the Governance of Banks (GGB) and Islamic Banking ........... 62 5.6 Challenges Related to the Implementation of the Guidelines for the Governances of Banks ......................................................................................... 63 5.7 Corporate Governance Reporting at SBYB............................................................ 65 5.8 Summary of the Chapter ..................................................................................... 66 Chapter 6 Conclusion ........................................................................................................ 68 6.1 Introduction to the Chapter ................................................................................ 68 6.2 Research Questions, Objectives and Contributions .......................................... 68 6.2.1 Research question 1 ................................................................................................ 68 6.2.2 Research question 2 ................................................................................................ 69 6.2.3 Research question 3 ................................................................................................ 69 6.2.4 Research question 4 ................................................................................................ 69 6.2.5 Conclusions and contribution to knowledge ....................................................... 70 6.3 Recommendations for action ............................................................................... 71 6.4 Limitations of the Study....................................................................................... 72 6.5 Further research in this area ............................................................................... 74 6.6 Summary of the chapter ...................................................................................... 74 References........................................................................................................................... 75 Appendices ......................................................................................................................... 81 Appendix 1: Sample Informed Consent Form ......................................................... 81 Appendix 2: Sample Request for Interview ............................................................. 82 Appendix 3: Sample Interview Questions ................................................................ 83 Appendix 4: Translated CBY Circular No. (3) for Year 2013 ............................... 88
8
Table of Figures Figure 1 Methodology Chart .............................................................................................. 33 Figure 2 Profile of the research respondents ...................................................................... 45 Figure 3 GGB Implementation & Bank Performance ....................................................... 61 Figure 4 Descriptions of Challenges and Measures Taken ................................................ 64
9
Glossary AAIOFI
Accounting and Auditing Organization for Islamic Financial Institutions
BoD
Board of Directors
BS
Board Secretary
CBY
Central Bank of Yemen
CG
Corporate Governance
CIPE
Center for International Private Enterprise
EM
Executive Management
ExCom
Executive Committee
GCC
Gulf Cooperation Council
GGB
Guidelines for Governance of Banks in Yemen
Gharar
Excessive Uncertainty
IAH
Investment Account Holder
IC
Intellectual Capital
IFC
International Finance Corporation
IFI
Islamic Financial Institution
IFSB
Islamic Financial Services Board
Maysir
Gambling
MBA
Master of Business Administration
OECD
Economic Cooperation and Development
Riba
Translated as interest
SBYB
Shamil Bank of Yemen & Bahrain
Shari’a
Islamic Law
SIB
Saba Islamic Bank
SSB
Shari’a Supervisory Board
TIIB
Tadhamon Islamic International Bank
UoL
University of Liverpool
YBC
Yemeni Business Club
YPC
Yemeni Polling Center
10
Chapter 1 Introduction 1.1
Background According to the Organization for Economic Cooperation and Development (OECD),
Corporate Governance (CG) principles involve a set of relationships between a number of stakeholders, including management, Board of Directors (BoD) and shareholders (OECD, 2015). These principles apply to publicly traded companies both in the financial and nonfinancial sectors. The corporate governance arrangements that are in place in large, public facing corporations have been heavily discussed in recent years, by policymakers, business practitioners and scholars alike.
The financial crisis of 2008 revealed how vulnerable the
financial markets are, and how deficient corporate governance practices could not prevent the malpractices that lead to poor performance, as pointed out by Kirkpatrick (2009). However, the corporate governance arrangements that are in place in conventional (i.e. Western) banks and those that are evident in Islamic banks are very different from one another. Islamic banking refers to banking activities that are consistent with the Shari’a (Islamic Law) (Samra, 2016). The Islamic banking industry has grown across the globe, and this growth is not only in countries with Muslim dominated populations, but also across many Western countries. Research demonstrates that nowadays, a growing number of multinational financial institutions, insurance companies, and investment banks are opening either Islamic windows or creating Shari’a compliant operations and products (Imam and Kpodar, 2016). The importance of corporate governance is quite significant in the corporate world, and it is more so in the financial sector (Ginena, 2014; Sulaiman and Joriah, 2012). As the application of corporate governance guidelines is quite prevalent in the financial industry, particularly banking, it has a significant impact not only upon the way in which banks function, but also on the performance and results of these institutions. Numerous researchers have studied corporate
11
governance in Islamic banks, addressing various issues such as board performance and Shari’a Supervisory Board (SSB) performance, and taking a comparative perspective, comparing the performance of Islamic and conventional banks (Khuram et. al, 2013; Hamza, 2013; Ginena, 2014; Sulaiman and Joriah, 2012). In addition, research suggests that the corporate governance practices in Islamic banks also differ geographically, and as suggested by Rihab and Hamadi (2014), governance practices in the Gulf Cooperation Council (GCC) countries are dissimilar from those in the Southeast Asian countries. Towards this objective, the Central Bank of Yemen (CBY) issued a circular in late 2013 in which it orders all banks that were operating in the country at that time to comply with a new set of Guidelines for the Governance of Banks (GGB). Under the new guidelines, Banks in Yemen have a one year timeframe to address all of the new requirements. The GUIDELINES FOR THE GOVERNANCE OF BANKS is the first of its kind in the country, but it is widely believed to have a significant impact on the financial sector (Grassa, 2015). The guidelines covers many areas such as: setting the roles and responsibilities of the Board of Directors (BoD), formation of board committees, risk management, related parties transactions, the wider stakeholders and many other important issues. The author believes that complying with such requirements will require considerable investment of time and resources from all banks and successful implementation will vary from bank to another. However, to date, no empirical study has assessed the impact that the new guidelines have had upon banks operating in Yemen. Furthermore, no study has sought to gather data on the challenges associated with the implementation of the guidelines from the perspective of key personnel. The aim of this dissertation is to address that gap in the literature.
12
1.2
The Aim of the Dissertation The main aim of this research study is to explore from an individual-level or micro-
perspective the impact of the application and implementation of the Guidelines for the Governance of Banks (GGB) at the Shamil Bank of Yemen & Bahrain (SBYB). In addition, the dissertation serves three secondary aims. The first is to add to the embryonic literature on Islamic banking in the context of Yemen. As the literature review will show, although there is a growing amount of research into Islamic banking generally, and into the corporate governance structures of Islamic banks, just a small proportion of this literature has been conducted in, and applicable to Yemen. Therefore, a further aim of the study is to contribute to the literature on corporate governance in the Yemeni context. Finally, the author also believes that this work will complement existing efforts in supporting corporate governance activities and training in the country. 1.3
Research questions In meeting the research aims that have been stated above, the following research
questions are addressed: RQ1 – What are the personal views and opinions of the board of directors and the senior management of the Shamil Bank of Yemen & Bahrain regarding the application and implementation of the Guidelines for the Governance of Banks? RQ2 – What are the benefits experienced by these individuals, of implementing the GGB at the Shamil Bank of Yemen & Bahrain? RQ3 – What are the difficulties and challenges experienced by these individual, in the implementation of the GGB at the Shamil Bank of Yemen & Bahrain? 13
RQ4 – What are the coping strategies adopted by these individuals (i.e. board of directors and senior management) to deal with the challenges arising from implementation of the GGB at the Shamil Bank of Yemen & Bahrain?
1.4
Research Objectives 1. Four research objectives have been in the course of this study. These are:To examine the personal views and opinions of the board of directors and the senior management of the Shamil Bank of Yemen & Bahrain in the application and implementation of the Guidelines for the Governance of Banks 2. To explore the benefits experienced by these individuals when it comes to the implementation of the Guidelines for the Governance of Banks at the Shamil Bank of Yemen & Bahrain 3. To examine the difficulties and challenges experienced by these individuals, in the implementation of the GGB at the Shamil Bank of Yemen & Bahrain; and 4. To identify the coping strategies adopted by these individuals (i.e. board of directors and senior management) to deal with the challenges arising from implementation of the GGB at the Shamil Bank of Yemen & Bahrain.
1.5
Overview of Literature A literature review is undertaken which examines corporate governance systems and
mechanisms in the context of Islamic banking. The review reveals that in terms of financial performance and resilience to external threats, Islamic banks often outperform conventional banks. This has been attributed by some to the strong corporate governance mechanisms used by Islamic banks. However, as the review shows, most of the research that has been conducted to date has been focused on countries in the GCC region or elsewhere in the Islamic world, such
14
as Pakistan. Relatively limited research has been conducted in the context of Yemen, so there is a gap in knowledge as to the impact of corporate governance on banks in that context. 1.6
Overview of Methodology As the research is qualitative in nature the research paradigm implemented is Interpretivism.
The study is based on a case study method (descriptive research design) and convenience sampling is used as sampling method. The primary data has been collected with interviews, and supplemented by secondary, archival data. The data collected were analyzed with thematic analysis or simple textual analysis. The data analyzed has been checkered for validity by implementing suitable techniques. The author has managed to conduct this research without deviating from the ethical norms despite several limitations. 1.7
Key Findings and Contributions The study revealed that overall, interviewees were positive about the Guidelines for the
Governance of Banks, and almost all of them were acquainted with, and in favour of observing its strict implementation. In fact, implementation had already begun with specific measures being established with support from the Board of Directors. However, it was noted that efforts to accomplish change had been severely affected by the political turmoil in the country. Interviewees also suggested that compliance with the GGB would produce financial benefits for the bank in the future. In general, the GGB is believed to have improved transparency, governance, supervision, and to have increased the alignment between management, board of directors (BoD) and the wider stakeholders of the bank. 1.8
Dissertation Structure Following this introduction, the remainder of the dissertation is structured into six main
chapters. The chapter that follows offers a critical review of the pertinent published literature on the issues of corporate governance and Islamic banking with the aim of deriving insights to inform the empirical aspects of the research study. In chapter three, the methodology used to 15
gather and analyze the data is described. The fourth chapter presents the research results and findings and discusses them in the context of the extant literature. Chapter five discusses and analyzes the data, while the final chapter outlines the conclusions and recommendation of the study, and identifies the contribution of this work to policymakers and to the wider research agenda. 1.9
Chapter Summary The purpose of this brief introductory chapter was to set the scene for the remainder of the
dissertation by providing a background to the investigation, outlining the scope and aims of the study and detailing the aims and objectives of the empirical research. The chapter identifies regulatory changes affecting Yemeni banks as the context for the research, and describes an empirical study that examines the impact that these regulatory changes have had upon the banks affected.
16
Chapter 2 Literature Review
2.1 Introduction to the Chapter A literature review is a document that explores, examines and synthesizes the existing published literature on the subject pertaining to the investigator’s focus of inquiry (Jesson, Matheson and Lacey, 2011). The literature review serves many functions. According to Saunders, Lewis and Thornhill (2015), the first purpose is to “map and assess the prevailing intellectual territory” (Saunders et al, 2015, p. 60). The review helps the research analyst to spot and perceive the present state of information in regard to the subject of interest. The review additionally helps the researcher to spot whether there exist any gaps in current knowledge that could be addressed through the empirical part of the research study and to understand the empirical strategies that analysts have previously employed (Jesson et al., 2011). With this in mind, the aim of this chapter is to assess, explore and critique the literature relevant to this study. The chapter deliberately examines research on corporate governance practices in Islamic financial institutions (IFIs) not only in Yemen, but also in the GCC region and the world at large. Following the advice suggested by Jesson et al. (2011), the review is structured in
line
with the
inverted
pyramid
approach,
whereby
the
investigator initially reviews the literature relating to broader topic of inquiry before narrowing the focus to the specific topic of study. Thus, the review starts by considering the concept of corporate governance, clarifying what is meant by the notion, and explaining the implications of corporate governance for the agency problem. Next, the review considers corporate governance in the context of the Republic of Yemen. It also provides a wider understanding of Islamic Banking, both as a practice and as an industry and explains its growing significance in the international arena, before considering corporate governance in Islamic financial institutes. 17
A concluding section summarizes the key points arising from the literature review, identifies the gaps in current knowledge and emphasizes what can be learned from the empirical investigation. 2.2 Corporate Governance 2.2.1 Defining Corporate Governance Although corporate governance is a well-established concept in the literature, there continues to be a lack of consensus with regards to the way in which it should be defined. Claessen (2006) has categorized the main definitions in the literature into two types: behavioral and normative definitions. The behavioral approach places emphasis on the actual behavior of firms. Firm Behaviour is typically measured by indicators relating to the performance of the firm such as growth and efficiency. In contrast, the normative approach is concerned with the rules relating to the governance of the company (Claessens, 2006). Those rules could stem from within the company itself or from outside the firm, such as the legal system or any financial market authority to which the firm is responsible (Claessens, 2006). The Organization for Economic Cooperation and Development (OECD), states that corporate governance principles involve a set of relationships between a number of different stakeholders, including management, Board of Directors (BoD) and shareholders (OECD, 2015). In an interesting addition, Wolfensohn, President of the World Bank, in his address in 2001, indicated that ‘fairness, accountability and transparency” should be prescribed to corporate governance (Wolfensohn, 2001). In line with the OECD definition, Saidi (2004) added that the responsibility for corporate governance lies in the hands of the ‘principal players’ in corporations, such as shareholders, board of directors and management. The aim of corporate governance is to “devise specialized systems of incentives, safeguards and dispute resolution processes that will promote the continuity of businesses that are efficient in the presence of self-interested opportunism” 18
(Kester, 1992, p. 24). Sam Hakim (2002, cited in Abu Tabanjeh, 2009) said “in the practical sense, corporate governance involves the nuts and bolts of how corporations should fulfill their responsibilities to their shareholders and other stakeholders”. As a side note, the author believes that board of directors of a company are like the tool that puts together the bolts and nuts as described by Hakim (2002). A more comprehensive view of corporate governance is reiterated by Blair (1996) as saying that corporate governance is cultural, institutional and legal arrangements that define what public companies can do, who control these companies, how do they exercise this control and how the returns and risks are allocated. 2.2.2 Corporate governance and the agency problem As elaborated above, corporate governance refers to the mechanisms, rules and processes by which an organisation is controlled and which governs decision-making relating to the strategic and day-to-day running of the firm. (Cadbury Report, 1992). The definition goes further to include all the stakeholders and related parties involved in the ownership and control of the organization (Kim and Nofsinger, 2010). It is important to note that corporate governance mechanisms and structures are designed to resolve conflicts between stakeholders in relation to the way in which the firm should be operated. According to Kim and Nofsinger (2010), there are three key actors in the corporate governance relationship – shareholders, debt holders and managers. Shareholders supply the firm with equity; as a consequence, they have a stake in its operation and performance and can claim ownership rights (Kim and Nofsinger, 2010). Debt holders also contribute investment funds that enable the firm to operate. Although debt holders can lay no claim to ownership, since the performance of the firm exerts a direct impact upon its ability to repay loans, they also have a stake in the future of the organization. Finally, managers assume responsibility for the day-to-day running of the firm. This role provides them with direct control over the operation of the firm (Kim and Nofsinger, 2010).
19
The corporate governance literature recognizes that there are likely to be conflicts between the demands and interests of shareholders, debt holders and management (Kim and Nofsinger, 2010). The literature refers to this as the agency problem. The issue of corporate governance and the agency problem have come under tremendous focus in recent years, after the collapse of WorldCom, Enron and Arthur Andersen. However, weak corporate governance mechanisms are far from a modern phenomenon. Zainab and Mustapha (2016) report that the topic was being discussed almost fifty years ago, in the light of the Allied Crude Vegetable Oil Refining Corp failure of 1963, and during the Watergate scandal of 1970s. However, the financial crisis of 2007 - 2009 triggered yet another round of criticism of corporate governance. For example, the OECD Steering Group on Corporate Governance indicated in a report (released June 2009) blaming a number of weak areas in corporate governance as contributing factors to the financial crisis. In contrast, Misangyi and Acharya’s (2014) research revealed that corporate governance mechanisms such as CEO incentives alignment, monitoring devices and board independence in fact have the potential to increase profits and can help to resolve the agency problem. It is important to note here that corporate governance of financial institutions differs somehow from those of non-financial institutions in a number of aspects such as board size, independence and board of director’s expertise as shown by de Haan and Vlahu (2016). Historically, corporate governance has been a relatively uncontroversial topic in the business and finance literature. Writing in 2015, for instance, Tricker and Tricker (2015, p. 2) pointed out that “10 to 15 years ago there was no evidence to suggest that it would attract the public interest and dominate the headlines of legal, business and financial newspapers to the extent it has”. That situation changed in recent years when a number of high profile governance scandals, including those of Enron, WorldCom, Polly Peck and Barings Bank came to the fore, highlighting the endemic limitations on corporate governance practices and their inability to 20
prevent fraud and corporate wrongdoings (Fernando, 2009). These failures revealed to the world the fact that the current regulatory structure prevalent within organisations was inadequate and defective for the twenty first century. In this context, there is a new focus on developing modern corporate governance systems which can limit the ability of managers to create such scandals by pursuing their own goals ahead of those of corporate shareholders (Agrawal and Chadha, 2005). In the case of the United Kingdom, for instance, the passage of the Companies Act 2006 and the subsequent development of the UK Corporate Governance Code and placed enhanced governance requirements on the directors of UK companies (Tricker and Tricker, 2015) 2.2.3 Corporate Governance in Yemen Until fairly recently, Yemen was one of few countries left without corporate governance activities or guidelines. Not only that, Yemen does not have a stock exchange authority or a modern financial market. Nevertheless, there do exist a small number of publicly held companies in Yemen. In 2008, the first corporate governance guidelines were issued as a result of an initiative taken by members of the Yemeni Businessmen Club (a private sector organisation) and other civil society organisations. The coalition comprised what was known as the Corporate Governance Taskforce, and it soon gained support from the International Finance Corporation (IFC) and Center for International Private Enterprise (CIPE). After almost three years of hard work, the taskforce released the first ever corporate governance guidelines with a series of events and campaigns to promote the concept among private sector companies as well as to the government and relevant regulators (Yemen Confronts Financial Crisis with Corporate Governance, 2009). Shortly afterwards, the Central Bank of Yemen (CBY) approached the Corporate Governance Taskforce requesting assistance to draft banking governance guidelines.
In
September 2013, the Guideline for Governance of Banks (GGB) in Yemen was launched and 21
CBY mandated that all banks operating in Yemen are to comply with this new set of guidelines. A time frame of one year was given. The GGB clearly sets out the role for the board of directors and executive management, and details measures relating to control and supervision. The guideline also clearly spells issues relating to transparency and disclosure and establishes the rights of shareholders and the wider stakeholders. Nevertheless, research suggests that the enforcement of these guidelines has been greatly affected by the ongoing political and military conflict in the country and the status of implementation remains unclear. 2.3 Islamic Banking The word Islamic banking is used interchangeably with Islamic finance and/or Shari’acompliant finance and refers to interest (riba) free financing consistent with Shari’a (Islamic Law) (Usmani, 2004). The fundamental themes of Islamic banking is the prohibition of Riba (translated as interest), Gharar (excessive uncertainty) and Maysir (gambling). Islamic finance witnessed explosive growth over the past two decades. In terms of value, Islamic finance has grown steadily over the last few decades to reach close to USD2 trillion in 2014 (Economist, 2014). Growth has been driven by about 300 Islamic financial institutions operating in about 50 countries across the world (IFSB, 2016). Further estimates suggest that the Islamic banking industry will be worth around to $3.4 trillion by 2018 in view of the steady annual growth of 15 to 20 per cent per year (Razak, 2015). Islamic finance is classified into three broad categories: debt-based financing, profit-losssharing (PLS) and lease-based financing (Ghayad, 2008).
From these categories come a
number of different financing modes such as Mudharabah (profit-sharing and loss-bearing), Murabahah (sales with markup and differed payment) Ijarah (leasing) and many others (Ghayad, 2008). Kammer et al. (2015) believes that Sukuk (Islamic bonds), the value of which reached USD $342 billion in 2015, tend to be an important instrument in the financing of infrastructure projects which help to support investment and to stimulate economic growth. In 22
addition, Abedifar et al. (2015) report that empirical finance literature finds that Islamic mutual funds perform better than conventional funds. In a relatively recent study conducted after the youth revolution in Yemen, Ayedh et al. (2014) confirmed that mainstream Yemenis adopt Islamic banking services, although factors such as the local environment and decision making control could influence their decisions. The study also argued that Yemeni people are religion- and culture-oriented and hence any product or service that has Islamic or Shari’a compliance will be easily adopted. 2.3.1 Corporate Governance in Islamic Financial Institutions Abu Tabanjeh (2007) has indicated that the modern corporate governance principles promoted by the OECD do not necessarily contradict Islamic governance principles which have existed for a long time since the beginning of the Islamic civilization. He added that the “strong belief of accountability in this world and the thereafter has strong implication on every Muslim’s life and governs a wider scope and extended obligations of corporate governance with that compared to conventional principles”. Nasser Saidi (cited by Sun et al. 2011) pointed out that Islamic financial institutions have demonstrated more resilience (but are not necessarily risk immune) during the global financial crisis due to the strict rules on lending and investment as presumed by Shari’a law, in other Shari’a governance. Nevertheless, Islamic banks, and indeed, all Islamic financial institutions (IFI’s), have a unique governance structures when compared with conventional banks. In addition to the common board of directors, Shari’a Supervisory Board (SSB) are set up parallel to the board of directors as mandated by Shari’a standards. The dual layer of governance is considered an additional governance mechanism to control and prevent the board or the executive management from taking high risk investment activities (Mollah et al, 2014).
23
The Shari’a Supervisory Board (SSB), which is sometimes referred to as the Shari’a Board, undertakes a number of functions such as certifying financial instruments as being Shari’acompliant, pronouncement of Shari’a ruling (fatwa), performing Shari’a audit, overseeing the calculations of Zakat, and approving contracts of various financing modes (Hasan, 2011). The SSB also ensures that all transactions are Shari’a-compliant and all rulings issued by the Shari’a Board are implemented. The members of the SSB are usually nominated by the board of directors and approved by the shareholders’ general assembly during the Annual General Meeting (AGM), at least this is the practice in Yemen and GCC countries. Shari’a governance in Islamic financial institutions is mainly guided by two bodies. The Accounting and Auditing Organization for Islamic Financial Institutions (AAIOFI) prepares accounting, auditing, governance, ethics and Shari’a standards for Islamic financial institutions and the industry (www.aaiofi.com). In addition, the purpose of the Islamic Financial Services Board (IFSB) is to promote sound and stable Islamic financial services and issues global standards and guiding principles for the industry (Islamic Financial Services Board, 2015). 2.3.2 Corporate Governance, the agency problem and performance in Islamic Financial Institutions A growing literature has considered the relationship between corporate governance arrangements, the agency problem and performance in the context of Islamic banks. In one stream of literature, emphasis has been placed upon describing the existing corporate governance arrangements of these banks. In a survey conducted in three jurisdictions: GCC countries, Malaysia and the UK, Zulkifli (2011) concluded that Islamic financial institutions, while working within the existing regulatory framework, are indeed committed to Shari’a governance. The authors found that these banks have competent, independent and functioning Shari’a boards, they seem to have operational procedures, disclosure and transparency guidelines. Farag et. al (2017) also found that the board of directors of Islamic banks plays a 24
decisive role in governance. On the other hand, Nadia Al-Olofi (2011) pointed out that practices of corporate governance according to the principles of Basel Committee on Banking Supervision are applied in Yemeni banks. In her research, Al-Olofi (2011) also found no statistically significant differences in the practice of the principles of governance between commercial and Islamic banks. Other researchers have empirically explored the relationship between the corporate governance arrangements and the financial performance of the bank. Generally, these studies suggest that the dual layer arrangement makes a positive contribution when it comes to the performance of these banks. For instance, Mollah et al. (2017), in a study of 52 Islamic banks and 104 conventional banks operating in 14 countries between 2005 and 2013, concluded that corporate governance structures in Islamic banks are more stringent compared to their counterparts in conventional banks. This allows them to take higher risks and can lead to better financial performance. Among the sample taken, there was one Islamic bank and three conventional banks from Yemen. In a solid study of over 90 banks in different countries between 2006-2014, Farag et al. (2017) investigated three hypotheses; 1) the relationship between the structure of Islamic banks and the financial performance of the bank, 2) the interrelationship of the dual structure (the board of directors and the SSB), and 3) the agency relationship and the unique role of restricted and unrestricted contracts. The researchers observed a relationship between the maturity of the financial institution and the strength of the corporate governance mechanisms used. Specifically, as the bank grows in size and becomes older in age, board size and SSB size also tend to grow. In addition, larger SSB size is associated with better financial performance, which reinforces the fundamental role of the SSB in certifying new financial products, and drives down agency costs.
25
There are, however, some studies which have reported conflicting findings. In an interesting yet surprising research study, Bukair and Abdulrahman (2015) examined the relationship between board structure, IAH, social contribution and the performance of 40 Islamic banks in the GCC countries during the period of 2008 to 2012. Those authors considered the impact of a range of external and internal control mechanisms that are designed to keep agents in check upon bank performance. They concluded that ownership structure, board mechanisms and overall level of social contribution (Zakah spending) do not have a significant impact upon the performance of the bank. Non-executive directors (NEDs) (directors who are independent from management, that sits on the board and who may help to guarantee the separation of decisionmaking and decision ratification and monitoring) were also found to have a limited impact on performance due to their lack of Shari’a and banking knowledge and as a result of being appointed by shareholders. Corporate governance structures that separate the role of the CEO and the Chairman as well as the Investment Account Holder (IAH) have a neutral impact on bank performance. The independence of the chairman of the board, however, is generally found to exert a positive impact on performance levels. This study also reveals that larger sized banks tend to have strong performance, a finding which is consistent with those reported in earlier studies (Al-Saidi and Al-Shammari, 2013). Ghayad (2008) argued in her work that performance of Islamic banks is affected not only by internal variables of quantitative nature (financial ratios) but also by qualitative factors such as managerial characteristics. She claims that the performance of Islamic banks should not be measured in the same way as conventional banks due to the level of deviation on the objectives. SSB members should be qualified not only in Shari’a background, but also financial and commercial as well to ensure quality supervision. Another recent study by Ahmed et al. (2016) conducted on all listed six Islamic banks in Bangladesh for six years (between 2009 2014) concluded that corporate governance 26
instruments may not be quite robust as they should be, indicating management incompetency. Nevertheless, the study highlighted some interesting themes pertinent to Islamic banking such as the notion that by virtue of Islamic philosophy, every person is accountable to Allah for his/her obligations, and that breaking these duties deemed punishable not only in this life, but also in the hereafter. An additional concept is about the implicit agreement to Allah, which is said to play a vital role in corporate governance in Islam (Kasri 2009, cited in Ahmed et al. 2013), and which does not exist in in conventional corporate governance. Ahmed et al. (2016) also argued that the Islamic concept of corporate governance is more comprehensive than conventional one. One stream of research argues that while the board of directors plays an important role in governance implementation, the Shari’a Supervisory Board (SSB) has an overriding power not only in monitoring Shari’a practices, but also in approving new products and controlling major investment decisions (Ghayad 2008, Bukair & Abdulrahman 2015, Ahmed et al. 2016, Hasan 2001 and Farag et al. 2017) Furthermore, it is suggested by Samra (2016) that SSB members must be liable for their ruling (decisions) in the event that wrong judgments are taken that lead to harmful results to the IFI. Samra (2016) also argued that the performance of Islamic banks is not affected by board structures and mechanisms nor by social contributions such as Zakah spending, yet Islamic banks are positively affected by separating CEO and chairman roles. Also, this paper reported noted effects on Islamic banks performance due to leverage. Overall, these pieces of work tend to agree that the Islamic concept of corporate governance is broader than conventional model. Although the additional levels of corporate governance used in Islamic banks have often been described by commentators as strong, some criticisms have been levied at the governance mechanisms of Islamic banks. Samra (2016), questioned whether the identity, or purpose of the corporation was properly clarified in Islamic banking. In the West, there is a debate, as yet 27
unresolved, as to corporate identity, with corporations being viewed as more of a social entity in Europe and a property in America (Samra, 2016). Samra (2016) argues that the corporate governance standards in Islamic Financial Institutions do not address the question of identity. She also suggested that governance code should be drafted in a way that hold Shari’a Supervisory Board (SSB) members accountable for the fatwa (opinion) that they issue. On the other hand, Haider et al. (2015) identified that in developing financial markets such as Pakistan, larger board size, as one element of governance, brought beneficial financial results for Islamic banks. The study used specific positive financial indicators such as ROE, ROA & EPS as measures of the financial performance of banks. Ghaffar (2014) sets out to explain the factors that drive the strong performance of Islamic banks in Pakistan. His research indicated that board independency, (which was measured by the number of independent directors on the bank’s board), is positively correlated with levels of profitability in Pakistani Islamic banks. Ghaffar’s (2014) results confirmed the findings of earlier studies that have also shown that that larger board size makes a positive contribution to financial performance. 2.3.3 Corporate Governance, the agency problem and performance in Yemen A limited number of studies have considered the issue of corporate governance in Islamic banks in the Yemeni context. The studies that have been published in this area do report mixed findings, but considered together they do offer a useful picture of the corporate governance environment among Yemeni corporations. For example, Bamaged (2011) indicated in her research that managers of Yemeni jointstock companies have different levels of awareness of the importance of applying standards of corporate governance, yet they so remain generally positive about it. She also confirmed that different demographic traits of managers (such as their level of experience and qualifications,
28
and their functional level) did not have a statistically significant impact on their ideas about the importance of corporate governance. One stream of research indicates that there is no difference in practical terms in the principles of corporate governance that are implemented in Islamic and conventional Yemeni banks (Olofi 2011, Bamaged 2011 and Al-Ademi 2015). Al-Ademi (2015) showed that corporate governance practices in Yemen vary in their implementation, with implications for company performance.
He attributed this to financial authorities employing unqualified
workers, which results in weak implementation of laws and regulations. He added that discord (inconsistency) in the laws, lack of transparency and an inefficient legal framework are major factors affecting corporate governance in Yemen and represent huge obstacle for the economic development of the country. He further stated that employees’ financial rights are not disclosed properly and stockholders are not treated equally with other shareholders. From the above discussion, it is obvious that corporate governance practices in Yemen are being applied in the banking sector, impacting both Islamic and conventional banks of different sizes and at different levels. 2.4 Conceptual Framework According to Tricker and Tricker (2015), the study of corporate governance can be underpinned by myriad different conceptual frameworks. Key conceptual frameworks that earlier researchers have applied to the study of corporate governance include transaction cost theory, agency theory and stakeholder theory. This study brings together two of the main conceptual frameworks in the literature in order to understand how new guidelines on corporate governance have impacted the case study firm. As discussed above, the agency problem is one of the central problems in the corporate governance system (Kim and Nofsinger, 2010). One conceptual framework which seeks to
29
describe and explain the way in which agents act and behave is agency theory (Tricker and Tricker, 2015). As the name suggests, agency theory is based on the assumption that the interests of agents (directors and other members of senior management), can diverge from those of shareholders (who are defined as principals in the relationship) (Kim and Nofsinger, 2010). Rooted in utility maximization theory, agency theory argues that the interests, preferences and behaviors of agents and principals are shaped by their personal stake in the firm (Tricker and Tricker, 2015). Furthermore, agency theory recognizes that the agency problem expands as the organization grows in both size and complexity. When this occurs, there is a greater likelihood that power will be transferred from principals to agents – a change that increases the potential for managerial missteps. Agency theory has attracted some criticisms in the literature, in relation to its viability and applicability (Tricker and Tricker, 2015). For example, observing the considerable number of studies which have been carried out under the agency theory’s auspices Dalton and Dalton (2005, cited in Tricker and Tricker, 2015, p. 95) have argued that that “it is apparent that agency theory has limited explanatory power for corporate governance research. It is on this basis that we have urged scholars to develop multi-theoretic approaches for corporate governance investigation”. One criticism that has been levied at this conceptual framework is its failure to take into account the full range of stakeholder interests (Tricker and Tricker, 2015). A conceptual framework that is designed to correct this deficiency is stakeholder theory. It is argued that stakeholder theory offers a more comprehensive account of the modern corporation than agency theory does (Kim and Nofsinger, 2010). According to this conceptual approach, all corporations have individuals and group, known as stakeholders, who have an interest in the survival and sustainability of the firm (Tricker and Tricker, 2015, p. 70). However, criticisms have been levied at the practical relevance of stakeholder theory. It has been argued that it downplays the profit motive which guides business activity and “provides no guidance at all as
30
to how competing interests, are to be ranked or reconciled. And it consequently provides no effective standard against which business can be judged” (Slinger, 1999, p. 138) In order to learn from both perspectives, and to correct for the deficiencies of each, this dissertation uses both as a unified conceptual framework.
2.5 Summary of the Chapter This chapter has presented and critiqued the published literature pertaining to corporate governance in Islamic banks, including that of Yemeni context. As discussed above, much research has been done on corporate governance in Islamic banks in many countries. That research has focused on describing the corporate governance mechanisms, tools and instruments in place in those banks, and generally suggests that there are qualitative differences in the corporate governance arrangements in conventional and Islamic banks. A further stream of research has explored the relationship between corporate governance arrangements and bank performance in Islamic banks, focusing on contexts such as Pakistan. That stream of research has reported conflicting findings. On the one hand, some of the studies that have been published in this area have suggested that the broader set of corporate governance arrangements in Islamic banks contributes to improve performance and helps these banks to circumvent the agency problem. Others, however, report conflicting findings. Clearly, the literature in this area would benefit from further research into this topic. Although the relationship between corporate governance and bank performance in Islamic banks has been explored in various geographical contexts, very limited research has been undertaken in the context of Yemen. Therefore, the current research represents an important endeavor in understanding how corporate governance impact Islamic financial institutions in a country where no stock exchange nor financial capital market exist. Shedding light on the
31
young and immature practices of corporate governance at the Shamil Bank of Yemen and Bahrain and in view of the newly mandated Guidelines for the Governance of Banks from the Central Bank of Yemen will constitute an important addition to existing literature, and will also provide the management and the BoD with insight into how to improve their work and eventually achieve better financial results.
32
Chapter 3 Research Methodology and Methods
3.1. Introduction to the chapter Research methodology refers to the set of assumptions, tools and techniques employed by the researcher in undertaking the empirical aspects of their study (Saunders et al., 2015). It is vital that the researcher is clear about the strategy he/she is using if the research findings are to be accepted as valid. Therefore, this chapter begins by elaborating in detail the research paradigm employed in the study. The chapter goes on to discuss the research approach, sampling and research design, data collection, data analysis and interpretation methods and data validation strategies adapted by the researcher in satisfying the research objectives of the current study. Consideration is also paid to the ethical issues guiding the research study.
3.2. Illustrative flow diagram of Methodology adapted in this work: The pictorial representation of various components of research methodology amended by the researcher is depicted through flow diagram given below (Figure 1 Methodology Chart). Figure 1 Methodology Chart
33
Flow chart of the methodology implemented in exploring the effects of Guidelines for the Research Paradigm
• Interpretivism
Research methodology
• Qualitative
Research approach
• Inductive
Research Design
• Descriptive (Case study method)
Sampling design
• Convenience Sampling
Sampling Plan
• Sampling Unit: Shamil Bank of Yemen & Bahrain • Target population: Members of Board of directors, Management team and Executive committee • Sample size: 15
Data Collection
• Primary Data: In depth interviews • Secondary Data: Archival Data
Data Analysis
• Thematic or Simple texual analysis
Validation
• Creditability • Transferability • Conformability • Dependability
Ethical Consideration
• Confidentiality, concealment and obscurity of the respondents
Governance of Banks (GGB) for Yemeni Islamic Banks. Source: Author’s own illustration 3.3. Philosophical Framework and Research Paradigm Researchers approach their work with a pre-existing set of philosophical assumptions (Saunders et al, 2015). Research philosophy can be defined as the “set of interrelated constructs (concepts), definitions, and propositions that presents a systematic view of phenomena by specifying relationships among variables, with the purpose of explaining and predicting the phenomena” (Kerlinger, 1979, p. 64). Easterby-Smith et al. (2012) indicated that understanding of the philosophical assumptions of research enhances the quality and creativity of research and its associated findings.
34
At the heart of the researcher’s philosophical framework is their research paradigm. A paradigm basically defines a set of assumptions of the analyst, which regulates the research and delivers a definite plan of conducting research (Saunders et al., 2015). Research paradigms are comprised of ontological, epistemological and methodological assumptions. The ontological assumption basically covers the way in which the researcher describes the research environment (Guba and Lincoln, 1994). Epistemological assumptions reflect the relationship that exists between subject and object. Methodology describes the method or procedure by which the research is being conducted to obtain the required data and is driven by the ontological and epistemological assumptions (Ritchi et al., n.d.). There are two dominant philosophies of the business and social sciences – positivism and interpretivism – and they differ considerably in terms of their epistemological and ontological assumptions, and their preferred methodologies (Easterby-Smith et al., 2012). The positivist argues that there exists a universal reality, which is knowable to the research investigator as long as they employ empirical tools and instruments that are drawn from the natural sciences (Easterby-Smith et al., 2012). Therefore, the positivist paradigm has a universalist ontology and objectivist epistemology. For these reasons, the positivist researcher tends to make use quantitative methods of data collection and analysis. Using this approach, positivist researchers attempt to identify patterns and trends in data and to use this information to explain the world (Saunders et al., 2015). In direct contrast to this approach, Guba and Lincoln (1994) argued that the way we understand reality is based on our social constructions and not as an objective truth, and subsequently, the most appropriate epistemological paradigm for research is be constructionism or interpretivism. While the positivist believes there to be one answer to research questions, interpretivism accepts multiple views of the participants involved in the study (Thanh and
35
Thanh, 2015; Wills 2007). Concepts such as relativism, pluralism and nominalism are at the heart of the interpretivist’s ontological and epistemological assumptions. In the current study, the interpretivism paradigm is used as the philosophical framework. It is believed that it is important to attempt to capture the meaning and interpretation of the corporate governance guidelines from the perspective of actors who are involved in its implementation. Therefore, the interpretivist perspective, rather than the positivist alternative, are preferred for this research study. 3.4 Research design: The Case Study Method This dissertation uses a case study methodology, which allows exploration and investigation of complex real-life phenomena as described by Zainal (2017). According to Mabry (2008, p. 214) a case study can be defined as “the empirical investigation of a specified or bounded phenomenon”. Benbasat, Goldstein and Mead (1987 p. 370) go further, pointing out that the purpose of the case study methodology is to “gather information from one or a few entities (people, groups, organisations)”. The case study methodology is one of the most common methods for gathering data pertaining to organizational change (Mabry, 2008; Yin, 2014). The approach is also used where limited research has previously been undertaken in relation to the topic of the research study, or when the phenomenon that is being studied is not well known (Benbasat et al., 1987). This is because, making use of multiple methods of data collection, and multiple sources, the research investigator can probe one single site of study in considerable depth (Mabry, 2008). As Benbasat et al., (1987, p. 370) have argued, the case study approach enables “investigators to carefully examine just a few instances of the phenomenon that they are studying, but in substantial detail… it enables researches to develop ‘thick’ description of the phenomenon which would not be possible using methods that take a broader approach to data collection sites”.
36
Yin (2014) has indicated three considerations that will impact whether the researcher should use a case study: (a) the type of question posed, (b) the degree of control the researcher has over behavior and events, and (c) the extent to which the phenomenon being studied is contemporary or historical. Consideration of these three aspects makes a case study suitable for this work. Furthermore, given that the impact of the new Yemeni corporate governance guidelines is not yet known, and that knowledge on corporate governance in the Yemeni banking sector has been identified to be severely lacking, it is suggested that conducting a case study in this context would be highly insightful. At the same time, the single case approach is most suitable where the researcher is employing an interpretivist epistemology, and this approach enables the researcher to demonstrate the practical dynamics of applying corporate governance principles and arrangements within Islamic banks context in one of the organisations in the targeted banking industry in the Republic of Yemen. According to Yin (2014), one of the most difficult challenges facing the research investigator using the case study methodology is the selection of an appropriate case study. Some guidance is available in the research methods literature. Mabry (2008, p. 214) suggests that the investigator should choose a case due to the “the case’s capacity to be informative about a theory, an issue, or a larger constellation of cases”. For this study, the Shamil Bank of Yemen and Bahrain has been selected as the site of study. As one of the important and active banks in the focal area, and a bank that has demonstrated commitment to Islamic principles, it is believed that this case study has the potential to be illuminating in regards to the subject of the research. 3.5 Research Approach An inductive approach is employed to the data analysis. Inductivism is an analytical procedure that is commonly used to analyze qualitative data whereby the analysis is directed by specific objectives (Saunders et al., 2015). The inductive approach develops research findings from the dominant and significant themes emerging from the raw data, devoid of 37
limitations enforced by structured methodologies. An inductive approach aids in understanding the procured complex data by developing themes and summarizing the raw data accordingly (Thomas, 2003).
3.6 Research Design Creswell (2014) defines a research design as a blueprint for research that is followed by the investigator at every stage of the research process. There are many possible research designs available to researchers who are using the case study method of research. For instance, Baxter and Jack (2008) described Explanatory, Exploratory, Descriptive, Multiple cases, Intrinsic, Instrumental and Collective designs all as possibilities in research design. According to Bryman and Bell (2015), research investigations can be descriptive, explanatory or exploratory in nature. The purpose of the descriptive investigation is to describe the nature of the research phenomenon under investigation. This type of approach is useful where the issue under investigation can accurately be conveyed to outsiders using the data collected (Bryman and Bell, 2015). The explanatory approach, on the other hand, seeks to explain the research phenomenon, while the exploratory approach is concerned with exploring phenomena in order to derive further knowledge for investigation The researcher followed the descriptive research design in the current study. According to Yin (2003) a descriptive design is used to describe a theoretical phenomenon or an intervention. This type of research, therefore involves exploration of opinions of the board of directors and the senior management of the Shamil Bank of Yemen & Bahrain, the difficulties and challenges experienced by these individuals and the strategies adopted by the board of directors and senior management to deal with the challenges arising from the implementation of the GGB. Although the instruments and tools which are used by interpretivists are myriad and broad in nature, qualitative methods of data collection and analysis tend to be preferred (Saunders et
38
al., 2015). This is because the interpretivist researcher places emphasis on sensation, intuition and reflection in the undertaking of their studies (Carter and Little, 2012). For this reason, the researcher decided to employ a qualitative approach in this research study.
3.7 Sampling Design According to the research methods literature, the qualitative approach is highly suited to non-probability sampling techniques (Saunders et al., 2015).
Non-probability sampling
techniques are those in which all members of the research population do not have an equal chance at being included in the final research study (Bryman and Bell, 2015). There are many different ways in which non-probability sampling techniques can be implemented. This study uses the convenience sampling strategy. This type of sampling involves collecting data from participants who can be easily approached by the researcher. The target population is usually spatially or temporally accessible by the researcher during the data collection process. The chief supposition associated with convenience selection is that the participants of the target population are consistent and homogenous (Etikan, Musa and Alkassim, 2015). This approach is practiced where the target population possesses definite practical standards such as geographical proximity, easy accessibility, willingness in participation and availability on the given time based on the purpose of the study (Saumure and Given, 2008). However, while this is a commonly implemented approach of obtaining data, this technique is neither strategic nor purposeful (Palinkas et al., 2013). The sampling unit was the Shamil Bank of Yemen & Bahrain. The target population included selected members from the Board of Directors (BoD), Executive Committee (ExCom) and members of the Management team. The researcher initially established a target of 15 individuals to take part in the study.
39
3.8 Data Collection Methods Two main methods were used to gather the data: primary methods and secondary methods. 3.8.1 Primary data Interviews are one of the main methods for gathering primary data from research respondents (Saunders et al., 2015). There are three types of research interviews: Semi structured interviews, structured interviews and unstructured interviews (Gill et al., 2008). These differ in terms of the extent to which the researcher makes use a guide to support their questioning technique. The structured form of interview consists of verbally administrated questionnaires, which are predetermined with no or little variation in question order and content, and with limited scope for probing for further detail (Saunders et al., 2015). Semistructured interviews, on the other hand are composed of various topics aids that enabled the researcher to explore specified areas, and which also permit the interviewee or interviewer to deviate from those topic so as to obtain a response in a more detailed manner. Unstructured interviews are conducted without specific guides and are performed when an in-depth investigation of the topic is required (Gill et al., 2008). In-depth interviews are the most important and probably the sole data source in qualitative research (DiCicco‐Bloom & Crabtree, 2006). Interviews are also valuable tools that aim to use language data to gain insight, views, perceptions and opinions of both individuals and groups (Easterby-Smith, et al., 2012).
The author conducted in-depth interviews with selected
members from Board of Directors (BoD) and members from the Executive Committee (ExCom) as well as members of the management team to draw a picture of their experiences, views and anticipations about aspects related to the application of corporate governance at the case study bank.
40
3.8.2 Secondary data Secondary data is data that is already in existence (Tracy, 2012). In mixed methods studies, secondary data is often used to supplement and support data gathered through primary means. In this study, secondary data includes relevant documents such as minutes of meetings for board of directors (BoD), executive committee (ExCom), internal reports, and circulars from the Central Bank of Yemen.
3.9 Data Analysis and Interpretation Content analysis or thematic analysis is the most implemented technique in analyzing primary qualitative research data, according to Thomas and Harden (2008). Thematic analysis is defined as a comprehensive process through which researchers identify themes emerging from the data (Hayes 1997). This type of analysis is more suitable for evaluating the data when the intention of the researcher is to obtain information in determining the association between the elements of study and to relate varied set of evidence that is relevant to the same study in different situations (Alhojailan, 2012). In this study the data procured from the Members of Board of Directors, Management team and Executive committee through interview records was subjected to thematic analysis by the author, in order to identify the themes relating to the various factors influencing the effects of the Guidelines for the Governance of Banks (GGB) upon Yemeni Islamic Banks in particular to Shamil Bank of Yemen & Bahrain. It is worth noting here that members of these three bodies (BoD, ExCom and the management team) are in some instances overlapping, i.e. all members of the ExCom are by default members of the Board of Directors.
41
3.10 Strategies Adopted for Validating Findings The research findings were validated based on the principles of creditability, conformability, transferability and dependability, as shown in figure 1 (Lincoln and Guba, 1985; Graneheim and Lundman, 2004). 3.10.1 Creditability Creditability means delivering trust in the verdicts of the study to the external readers. When a research is being executed with proper reference with experts, it ensures the credibility of the research. This involves the execution of the results in the right manner (Granebeim and Lundman, 2004). In order to deliver trust, the researcher retained all of the raw data from the study, and has been transparent about the way in which the data has been collected and analyzed. 3.10.2 Conformability Conformability refers to the assurance given by the researcher about the obtained verdicts and confirming that the results were not illusion of the author, but the summary of the vast data obtained by the researcher from the participants (Koch, 2006). This is met by providing verbatim statements from the interviewees to back up the claims made by the author. 3.10.3 Transferability This concept refers to the generalizability of the results of the research investigation to varied situations (Bitsch, 2005). Although this was a case study investigation, the results of this research provides future researchers with opportunities to explore and understand the effects of the Guidelines for the Governance of Banks for other banks.
3.11 Ethical Considerations Every researcher is required to maintain ethics in every stage of the research procedure, from selecting the respondents to validating the collected report at conclusion of the research
42
(Saunders et al., 2015). Research ethics is defined as “the moral principles guiding research from its inception through to completion of results and beyond” (Crotty, 1998, p.72). One of the main principles of ethics is confidentiality. The researcher has obtained consent to name the case study organisation, but all those that participated in the research study have been anonymized. Another fundamental ethical principle that must be followed in the undertaking of research is the principle of informed consent (Ali and Kelly, 2012). This is defined as “the knowing consent of an individual, or a legally authorized representative, able to exercise free power of choice without undue inducement or any element of force, fraud, deceit, duress, or other form of constraint or coercion" (Ali and Kelly, 2012, p.51). In order to meet the principle of informed consent, all participants in the study were provided with a full explanation about the objectives of the research and were assured that the responses by them would be used only for the academic purposes and for this particular investigation. The author officially requested the meeting in writing with each respondent (Appendix: 2), where a Personal Information Sheet (PIS) was also presented and explained, and each participant was required to sign the Informed Consent Form (Appendix: 1). 3.12 Summary of the Chapter This chapter has presented the methodological approach used in the study of the effects of the Guidelines for the Governance of Banks (GGB) upon Yemeni Islamic Banks, particularly examining the Shamil Bank of Yemen & Bahrain. As the research is qualitative in nature the research paradigm implemented is Interpretivism. The study is based on a case study method (descriptive research design) and convenience sampling is used as sampling method. The primary data has been collected with interviews, and supplemented by secondary, archival data. The data collected were analyzed with thematic analysis or simple textual analysis. The data analyzed has been checkered for validity by implementing suitable techniques. The author has
43
managed to conduct this research without deviating from the ethical norms despite several limitations.
44
Chapter 4 Data Collection and Data Analysis
4.1 Introduction This chapter presents the research findings, and discusses them in light of the aims and objectives of the research. The chapter is structured as follows: in the first instance, a brief description of the research sample is provided. In the core of the chapter, the main results of the study are presented thematically. A short concluding section summarizes the findings of the research study. 4.2 The Research Sample In total, nine interviews were carried out with respondents. No interview took longer than one hour to be carried out. Table (1) below lays down important and detailed information about the participants such as gender, age, education, total work experience, specific banking experience and region/country of experience The interviewed participants range from their midthirties to early sixties, with all interviews being conducted with male respondents. It is important to note that all of the participants in the study were highly educated. Respondents were asked to describe their highest level of education to the interviewer. Virtually all of the interviewees obtained at least one degree or diploma from an institute of Higher Education (HE). In addition, all of the participants in the study had considerable experience of work, and specifically of the banking sector. This provides evidence that respondents were in a good position to be able to comment on the GGB and the implementation. Figure 2 Profile of the research respondents
45
Profile of Participants in the Interview No. of Gender Participant 1 2 3 4 5 6 7 8 9
Male Male Male Male Male Male Male Male Male
Age
Job Designation
55 35 59 n.a. 49 39 43 58 62
Deputy GM Board Secretary & Head of Planning Dept. CEO Board Member Board Member & member of the Audit Committee Member of CG Committee - Independent Board Member Vice Chairman Board Member & Chair of Audit Committee
Work Banking Experience Experience (years) 33 12 37 30+ 20+ 17 18 34 40
33 12 37 30+ 7 6 10 10 9
Country/ Region of Experience Yemen Yemen Yemen Bahrain Yemen Yemen Yemen Saudi/Bahrain Saudi
Source: Author
The following strands will provide a listing of the various themes and subthemes identified on the basis of evaluation of the responses given by the interviewees. 4.2.
The CYB’s Guidelines for the Governance
The interviewees demonstrated having a working and hands-on understanding of the CYB’s Guidelines for the Governance of Banks and most of them were able to sum up a clear and lucid definition of it when questioned on the subject. The responses demonstrate that the selected respondents are well aware of the Guidelines for the Governance of Banks and the need for their implementation.
4.2.1 Definition/Conceptualization of the Guidelines for the Governance of Banks Most of the participants were familiar with the idea of Guidelines for the Governance of Banks (GGB) and were able to offer theoretically sound definitions of what they understood from it. According to Board Secretary & Head of the Planning Department, “Governance is a set of administrative rules based on principles of transparency, accountability, fairness and responsibility in addition to the reputation of the company and risks.” Other interviewees also offered precise definitions of the notion, demonstrating that they are aware of the nature and need for guidelines for the working of banks and the overall purpose and objectives behind the
46
decision to implement the Guidelines for the Governance of Banks. As stated by one board member “Governance is about unify laws, rules, procedures of administrative, financial and technical of all banks to prevent contradictions and interference among those working in the financial sector.” The aforementioned response demonstrates that the senior employees are aware of the significance of the GGB in ensuring the smooth and egalitarian functioning of the various components of banking sector so as to secure the interests of all major stakeholders.
4.3 Implementation of the Guidelines for the Governance of Banks The analysis of the initiation and present status of implementation of the GGB reveals that there are significant impediments to the smooth execution of the guidelines, such as the those due to the political instability even though the process of implementation has been initiated by the board of the directors of SBYB. Additionally multiple respondents listed that precise steps and measure were taken in order to ensure effective compliance with the GGB, these included the formation of committees and process of internal audits, reviews and checks.
4.3.1 Initiation of Implementation of the GGB On being asked about the process of initiation of the execution of the GGB in their respective organisations one of the board members who have extensive experience in the Kingdom of Bahrain stated that “The regulators at the Kingdom of Bahrain issued rules and regulations that governs the subject of corporate governance called “High Level Controls”. Other reason for the initiation of the process mentioned by the interviewees include the international financial crises, according to “the international economic crises in the past two decades, there has been a need for administrative reforms in general and in financial institutions in particular.” The mandatory provisions for instituting the reforms included by the government
47
remained a primary reason, cited by the participants (the only independent member of Corporate Governance Committee). Moreover, it was stated by Deputy General Manager of the bank: “We at SBYB started the process of drafting our guideline after the CBY circulated the GGB”, the bank started the process after the prompt by the government. Initial implementation of the Guidelines also face some opposition by some members of the board of directors, a comment made by one of the members of the board.
4.3.2 Present status of implementation of the GGB Regarding the present status of the implementation of the GGB in their concerned respondents (one member of the board) mentioned that the implementation has been affected by the political turmoil and that there is a long road ahead (another member stated) when it comes to efficient execution of the GGB. As recounted by the BoD Secretary: “When we think of problems, we encounter some problems, such as the security issue and the current ongoing war, forcing board members and general manager to leave the country.” According to one member of the BoD efficient “implementation is subject to board members well, and the formation of Corporate Governance Committee was the first step.”, and the interventions made by the concerned boards but as such the process requires further action. Hence it is evident from the participants responses that there is a considerable room for growth in the implementation of the GGB in the banks as the process is underway and hasn’t been completed, but the reasons for the hampered execution such as political instability and security related concerns remain beyond the control of the banks and the larger financial industry.
4.3.3 Measures taken to ensure effective implementation and compliance On the question of the concrete measures taken by their respective organization in order to comply with the GGB, the independent member of the CG Committee mentioned that:
48
“The effective measure that will be taken so far represented in the Governance Committee plan to have the GGB implementation plan with clear timeframe milestones.” Other respondents listed other steps taken to ensure compliance such as the formation of relevant committees, “The board of directors formed GGB Implementation Committee…. the board of directors also formed another two committees: Risk Management Committee and Internal Audit Committee.” A few respondents also documented the formation of committees and instrumenting review procedures and checks in departments in order to ensure smooth compliance (board member & board Secretary).
4.4 Benefits and Effectiveness of Implementation of the GGB There were a wide range and nuanced responses about the effectiveness and the advantages consequent to the implementation of the GGB, the responses of participants about these across a range of subjects such as the impact on the revenue and profits, risk management, stakeholders’ management, bank performance and the overall supervision and governance remained consistent, with most interviewees agreeing of the upsurges seen in these areas post the implementation. The consistency in the responses indicate that the implementation of the GGB has seen concrete and noticeable improvement in these areas and with little to negligible negative feedback. 4.4.1 Revenue and Profits According to the CEO the bank has been able to maintain its operations profitably despite the political tumult in the country, as put by him:
“war in Yemen has negatively influenced the ability of banks to make profits since many businesses have been disturbed which has affected the bank’s ability to recover debts”.
49
A similar response about increase in the level of profits post the implementation were also reported by member of the board. On the other hand, and as expressed contradictorily by another member of the board, the costs of implementation may initially lead to a decrease in amount of profits; however with respect to the long-term considerations there is expected to be a rise in the numbers. According to one of the members who also hold the CEO position in a Bahrain bank, there is a correlation between good corporate governance practices and the overall profitability of the banks: “Good Corporate Governance practices generally minimize conflicts of interest and promotes high level of disclosures which in return enhances the market and investors confidentiality on the organization. This would defiantly contributes to the banks’ profitability”. To sum it can be said that for most respondents the revenue and profits saw an overall rise or at least positive estimates for the future.
4.4.2 Bank Performance As stated by member of the board, the introduction of the GGB saw an increased alignment between the management and the board of directors: “The benefits of applying GGB is to create a real balance between board and management and tune duties and responsibilities so no one side override the other side.” In addition, bank performance has also been enhanced because of the reduced conflict of interest as recounted by the CEO: “This has enabled the bank avoid conflict of interest and reduce risk since decisions are made for the best interests of the company and not related parties”.
Most of the interviewees presented a positive picture of the state of bank performance and the effect of the execution of the new Guidelines on the daily operations and working.
50
4.4.3 For Risk Management In terms of the the effect of the GGB on the risk management, one independent CG Committee member stated that the realization that the definition of the range of risks faced by the banks need to be expanded by acknowledging that the: “bank’s Risk Management function framework has expanded to include all kinds of risks: operational, liquidity, market, and other risks. In addition, internal control systems are being developed to identify and evaluate all these risks and this process is associated with established goals that are linked at different levels and is internally consistent”. Other participants also stated that the guidelines help in reducing the risk to the banks and saw not only quality improvement in information flow to the BoD but also regularity intervals in various risk related reports (board member and board secretary).
4.4.4 For Stakeholder management When asked about the stakeholders’ management, the interviewees cited that the GGB has been instrumental in securing the interest of stakeholders: “Prior to the implementation of governance, there was leniency with regard to the interests of shareholder management…Governance has prevented this type of exploitation by stakeholders for personal purposes and the Central Bank of Yemen is a strict in this regard” (member of BoD & Audit Committee). Similar responses about improved stakeholders management were also cited by one member of the board, according to him the GGB has been effective in securing the rights of stakeholders and in avoiding conflicts of interest among them:
51
“Good corporate governance standards and practices preserve the rights of all stakeholders and minimize the potential conflict of interest through adequate disclosures and procedures which enable the relevant stakeholders to make right and informed decisions”. A similar response about enhanced stakeholders’ management were also given by member of the CG Committee, and another member of the BoD which demonstrated enthusiasm for the future of overall quality management.
4.4.5 Governance and supervision The implementation of the GGB has seen more effectual governance and supervision, post its introduction as recounted by one member of the BoD while on the other hand Deputy GM is hopeful for the future “Good implementation of the GGB and banking standards will be reflected positively”. Other respondents mentioned that the transparent policies and structures introduced by the GGB help in ensuring and enhancing the operations, as stated: “Yes, it does, guidelines of how the bank can be directed or controlled in an ethical, fair and transparent manner can lift its objectives and goals” (CEO). On the subject of the governance and supervision, the responses were largely alike, with most of the interviewees agreeing on the positive incidence of the implementation of the guidelines on the governance and supervision of the banks.
4.5 Guidelines for the Governance of Banks (GGB) and Islamic Banking On the subject of the alignment between GGB and the principals of Islamic banking respondents agreed that there was an adequate level of synchronization between the two, with the guidelines largely complying with the Islamic (Shari’a) law and ensuring that the two were compatible with each other. However, the impact of the GGB on Islamic institutions was not seen as important by the interviewees and the fact that the Islamic financial institutions were
52
able to remain unaffected by the financial crises were primarily due to steps taken by the organisations themselves and not due to the execution of the GGB.
4.5.1 Alignment with Islamic Banking Principals The guidelines and the alignment with the principals of Islamic Banking were cited as being well synchronized, as stated by member of the Audit Committee: “Islamic banks originated to attract a large spectrum of potential fund owners who wish to deal only in banks compliant with Islamic law (Shari’a)…. the governance guideline fits well with Islamic law and (Shari’a) banking. Governance Guideline include special chapter for Islamic banks and add Shari’a Supervisory Board be mandatory requirement to ensure that all transactions within the Bank are compatible with Islamic law (Shari’a).” CEO insisted that adequate familiarity with the GGB would make it evident to the stakeholders that the Islamic Banking principals and the Governance guidelines are alike and the relationship they share, and are based on the principals of “integrity, honesty and transparency” which are fundamental to Islam.
4.5.2 Impact of the GGB on Islamic Financial Institutions According to one of the BoD members, the implementation was not responsible for the growth achieved by Islamic financial institutions in the selected time period: “I believe Islamic financial institutions performed well during the 2007-2009 financial crisis not because of the GGB or similar governance codes, rather, it was due to fundamentals and principles of Islamic banks”. However according to Deputy GM the primary reason Islamic financial institution were not swept away by the global crises were the efforts made at their end with little impact from the implementation of the GGB, “The main reason that Islamic financial institution were least
53
affected during the global financial crisis was the investment tools they used. GGB also helped in taking decisions that are in line with their objectives and within industry standards” (Deputy GM).
4.6 Challenges Encountered in the Implementation of the GGB The primary challenges encountered in the implementation of the GGB can be understood as originating from the socio-political instability in the region and this was consistently recorded by the participants that were interviewed for the present study. There was general consensus in the responses that the troubled socio-political condition was to blame for the loss of investor confidence and the ensuing lack of financial resources in the region. Additionally, the socio-cultural environment was also to blame for the beliefs held by the individuals, such as those about private monopoly which also formed interruptions in the efficient implementation of the GGB.
4.6.1 Relating to the socio-cultural environment According to Vice Chairman who also have long experience in Saudi corporate affairs, the socio-cultural beliefs and thoughts processes do constituted an impediment to successful implementation of the GGB, as stated by him: “Yes indeed.
Unfortunately, there is a believe still, in some people…(they) think these
institutions belong to them only irrespective if there are investors and shareholders…This is a social and cultural issue which pose great difficulties in front of good governance. Responses such as these confirm that the viewpoint and perspectives defined by the cultural setup need to undergo an overhaul in order to keep up with the reforms being made.
54
4.6.2 Political and Financial stability A major challenge to the successful implementation of the GGB is that the respondents consistently recounted were inconveniences created by the prevailing political instability in the country, which leads to a loss of investor confidence and consequentially reduced financial resources. According to BoD secretary: “Financial resources could be one reason, as management will not like to spend on this given the financial difficulties during this political situation. Good implementation will require some financial resources.” Other respondents also endorsed this viewpoint, “It poses a huge challenge to the financial system as a whole i.e. liquidity problem, the boom of informal financial transactions, the lack of foreign exchange reserve, etc. There is a need for urgent political settlement to address the recovery of the financial system in Yemen” underlining the critical nature of the situation and the need for immediate action on the political front. On the other hand BoD and Head of Audit Committee stated that the lack of financial resources did not constitute an impediment to the implementation of the GGB. Hence responses on the subject of financial resources remained inconsistent while on the subject of the vulnerable political environment were alike.
4.7 Measures or Steps Taken to Overcome the Challenges In consideration of the tumultuous socio-political situation, there is a need for measures that would be instrumental in ameliorating the current state of affairs. Most respondents do seem to agree with this statement and while they realised that the political circumstances were beyond their individual control, the same need not be said of the socio-cultural context and the beliefs harboured by the people that constitute an obstacle. Thus, multiple interviewees reported organising interventions and measures focussed on social reform and awareness, and effective redistribution of the available resources.
55
4.7.1 To overcome political and socio-cultural challenges On being questioned about the efforts made to cope with the political and socio-cultural turbulence in the geographical region, one BoD cited that while the political problem was beyond the purview of the individuals, they were including steps to cope with the social situation and making relevant interventions: “As for the political challenges, it is beyond our scope and we have to live with it. Sociocultural challenges can be managed by awareness campaigns, lectures and training to explain it” (BoD member). On the other hand, some measures have reportedly not been implemented completely although the process of implementation is now underway, “Some measures from within our bank was taken such as forming various committees, but some measures from regulatory point of view, not taken due to the overall situation” (Deputy GM).
4.8.1 To ensure effective allocation of resources The redistribution of resources is a pivotal step in ensuring the efficient inclusion of the GGB and respondents were optimistic about the steps to be taken in the direction by their respective boards, according to BoD member: “The board will allocate enough resources to ensure effective implementation because the importance of the GGB. Whatever resources we allocate will be paid off in the future. “According to BoD secretary “The most important measure taken so far is the preparation of the draft governance guideline in front of the board for approval. This is in my opinion the corner stone for all future and upcoming activities, and results of implementation will be presented routinely in front of the board.”
56
Other respondents recounted taking similar steps such as the development of relevant policies and procedures, establishing a governance committee adjunct with the board of directors and the appropriate allocation of corporate governance responsibilities in the overall organisation (BoD member).
4.9 Summary of the Chapter This chapter has comprised a presentation of the research findings from the empirical part of the study. Interviews were conducted with 9 members of the case study bank, all of whom were male. All participants in the study were highly experienced, with each individual having at least twelve years working experience, and nine years experience working in the banking sector. Therefore, the respondents each were in a good position to be able to comment on their perceptions of the new Guidelines, the impact of the introduction of the Guidelines on the bank, and their implementation.
57
Chapter 5 Analysis of Data and Discussion of Findings
5.1 Introduction to the Chapter This chapter of the dissertation is devoted to the compilation of the results presented in the previous chapter with the existing literature devoted to the observed topic. For convenience, the information in this section will be posted according to the thematic findings from the analysis of primary and secondary sources. This order of thoughts presentation, also, is believed to be helpful in the author’s endeavor to address the set research questions, which will be listed below: RQ1 – What are the personal views and opinions of the board of directors and the senior management of the Shamil Bank of Yemen & Bahrain regarding the application and implementation of the Guidelines for the Governance of Banks? RQ2 – What are the benefits experienced by these individuals, of implementing the GGB at the Shamil Bank of Yemen & Bahrain? RQ3 – What are the difficulties and challenges experienced by these individuals, in the implementation of the GGB at the Shamil Bank of Yemen & Bahrain? RQ4 – What are the coping strategies adopted by these individuals (i.e., the board of directors and senior management) to deal with the challenges arising from the implementation of the GGB at the Shamil Bank of Yemen & Bahrain? 5.2 Basic Concepts and Definitions It is known that the concept of Islamic banking refers to the method of conducting financial transactions in accordance with the laws of Shari’a. In fact, the analysis of literature confirmed that the functions of banks in the Islamic model do not differ from the traditional ones: they provide the work of the national payment system and act as financial intermediaries. The key
58
difference is the prohibition of interest in the form of interest payments and compliance with a number of principles of Islamic finance (risk sharing, prohibition of speculative behavior, a principle of non-inviolability of contracts). The second key concept is the Guidelines for the Governance of Banks that can be described as a set of rules aimed at regulating the relationships between different stakeholders. Using the definition provided by The Organization for Economic Cooperation and Development (OECD), Saidi (2004) clarified these interested parties as a board of directors (BoD), shareholders, and management. At this stage of discussion, it is necessary to state that the further analysis will be conducted in accordance with the influence of GGB implementation on each of these groups. Concentrating on the stakeholders that directly participate in the management of the bank (board of directors and managers), it can be concluded that interviews proved the fact that all of them have awareness about standards of corporate governance, their implementation, and the effect on different aspects of bank functioning. At first glance, it seems that these findings go against the opinion expressed by Bamaged (2011), according to which managers have different levels of awareness about standards (which, however, does not determine by their demographics). At the same time, the deeper analysis with applying the understanding of existing limitations - such as interviewing only male representatives of the Shamil Bank of Yemen & Bahrain - confirms that managers potentially can experience different emotions about the implementation of the GGB in the specific bank or country (Yemen) settings. 5.3 Implementation of the Guidelines for the Governance of Banks Generally, it can be stated that findings from the research confirm the widespread idea about the significant role of the board of directors in the implementation of governance rules. However, there is another theory that can be found in the previous studies and was confirmed in the frames of the conducted case study - the increased power of the governmental institution. Literature review shows that the Shari’a Supervisory Board (SSB) in the contemporary
59
condition not just monitor Shari’a practices but also control the major decisions within the bank operations (new products, investments, and others). At the same time, the investigation made in the frames of this dissertation revealed empirical evidence of the governmental influence on the stages of implementation and development of the GGB in Yemen Islamic banking system. At the same time, it was repeatedly noted that the political situation (especially turmoil) fundamentally affects the process of implementing the rules and creates the challenges that complicate the introduction of mechanisms that facilitate the adoption of the GGB. Among the other factors that were mentioned as reasons for initiation of GGB introduction was the international financial crisis that affected banks that operate both under commercial and Islamic principles. Nevertheless, based on the analysis of primary and secondary sources, the idea put forward by Ghayad (2008) and developed by other specialists about the need to apply another system of performance measuring to Islamic and traditional commercial banks is confirmed. The major evidence is the fact that corporate governance practices in the banks should be approved by the board of directors as those that correspond to the Shari’a requirements. Results of text analysis of the archival data reveal the problems that were mentioned as the characteristics, which describe the present status of GGB implementation. The most significant is the delay in approval of the corporate governance guidelines changes for the specific conditions of the Shamil Bank of Yemen & Bahrain. Despite the mentioned obstacles in adoption the Guideline for Governance of Banks, questioning stage of data gathering revealed that managers and members of Board of Directors in the Shamil Bank of Yemen & Bahrain share the opinion about the existing of measures taken for effective implementation of changes. First of all, respondents highlighted the creation of the plan that not only described the needed steps but also sets a clear timeframe for each of them. The second measure that was allocated from the data is the creation of relevant committees, in other words, the decentralization of control over the performance of each step.
60
The related measure involves the creation of procedures that ensure examination for compliance with the GGB. Even though the process of implementation has already started and the measures were developed, some respondents notice that not all of them are fully implemented, and more importantly, not all the necessary measures have been thought through and taken for the effective implementation of the corporate governance in the Bank. 5.4 Benefits and Effectiveness of Implementation of the GGB Usually, the discussion about effectiveness and benefits of implementation of new policy or innovations occur after a long period of full-fledged operation, practice in this case. Taking into account the fact that the Guidelines of Governance for Islamic Banks in Yemen is at the implementation stage, the advantages will be observed as theoretical considerations of involved people. Applying such pattern, it can be concluded that results of the practical part completely correspond with the theoretical findings. The studies observed in the literature review found that the corporate governance arrangements in the case of Islamic banking system make a positive contribution to the performance of the banks. On the basis of existing studies in the direction of relations between the GGB implementation and banking performance, five main areas that experience changes were distinguished and analyzed in the following table. Figure 3 GGB Implementation & Bank Performance GGB Implementation & Bank Performance Area
Change/Effects + Respondents mentioned the increase in profit levels after the initial stage of implementation.
Revenue & Profits
+ The corporate governance is believed to be the reason why the Shamil Bank of Yemen & Bahrain remained to be profitable even in the politically unstable situation in the country.
61
- There is a short-term prognosis according to which the profit will be decreased due to the costs of the initial stage of GGB implementation. + It is expected that after the introduction of the GGB, the balance between duties and responsibilities of different parties (Board of Directors and management team) will be set. Bank Performance
Risk Management
Stakeholder management
Governance and Supervision
+ Also the interviewed senior management of Bank emphasized the positive impact of the implementation on the performance that is determined by the reduced conflict of interest between the mentioned parties. + Generally, it is confirmed both in theoretical and practical parts of analysis that the guidelines help reduce the risks that, in turn, improve the quality of the performance. - The workers of the bank adhere the opinion that the implemented GGB does not contain an exhaustive list of risks faced by the Islamic banks. Therefore the risk management does not reach the full potential. + The literature review mention that GGB proved the instrumental benefit in securing the stakeholder interests by ensuring their right in addition to the function of avoiding conflicts among them. + There is an opinion shared by respondents that impact of GGB on stakeholder management adds to the general quality management in Islamic bank performing. + The analysis of primary data revealed that there is a consensus about the positive impact of implementation of the GGB on the governance and supervision of the banks due to the prescribed mechanisms of operations and control. - This fact once again proves the increased role of governmental authorities in the function of operation control.
5.5 Guidelines for the Governance of Banks (GGB) and Islamic Banking A great part of attention in this dissertation is devoted to the understanding the mechanism of compliance between the Guidelines for Governance of Banks and the functioning of Islamic banking institutions. The previous researches of banks, in which the several operations on the territory of Yemen, found that corporate governance in Islamic banks allow them to take higher risks, which, in turn, ensures the better performance. The same idea was popular among the opinions gathered during the interviews with workers of the Shamil Bank of Yemen & Bahrain.
62
Even though the link between GGB and performance of banks is an established fact, there are still questions about the unique case of Islamic financial system. The common opinion regarding their connection is the high level of synchronization, which, at the same tie, can be noticed only by the most experienced people and those who have a great level of familiarity with the Guidelines for the Governances of Banks. Respondents in the upper managerial positions and the representatives of the Board of Directors insist that the governance guidelines and Islamic banking principles are similar. The manifestation lies in the nature of both concepts, mainly in their underlying principles, including integrity, honesty and transparency. However, among the generally consistent opinions, there is an interesting view of one of the respondents on the connection of the GGB and Islamic banking system. Contrary to the general belief (that also finds confirmation in the previous theoretical works) the success of Islamic financial institution during the financial crises should be attributed not to the governance codes such as the GGB but to the basic fundamentals of such banking principles themselves. Unconditionally a direct conclusion from this stage of analysis is the need for a more detailed study of Islamic banks performance in the period of financial crises with the accent on the significant influential factors. However, a deeper analysis of this extremal idea (the one that goes against the overwhelming majority) allows saying that it can be determined by the short period of time elapsed since the initiation of the Guidelines for the Governances of Banks. 5.6 Challenges Related to the Implementation of the GGB Previously, the issue of the implementation of the Guidelines for the Governances of Banks was discussed from the internal toward banking institution position. At the same time, it should not be forgotten that any financial institution operates in the wider environment that also influence the process within it. Thus the analysis of primary and secondary sources, two
63
dimensions of the external environment were allocated due to the fact of their impact on the process of implementation of governance guidelines within the Shamil Bank of Yemen & Bahrain. The table below provides a brief description of challenges and the measures taken to overcome them:
Figure 4 Descriptions of Challenges and Measures Taken Challenges Encountered in the Implementation of the GGB
Dimension Sociocultural Environment
Political Environment
Measures or Steps Taken to Overcome the Challenges
Beliefs and thoughts in the specific socio-cultural settings affect the level of success during the implementation of the GGB. There are potentially problematic perspectives defined by a cultural setup that should be taking into account.
Understanding the importance of these the socio-cultural factors (traditions, beliefs, and values) lead to the incorporation of specific coping strategies that allows making relevant interventions the bank itself.
A major challenge to the successful implementation of the GGB is the inconveniences resulted from the political instability in the country. A loss of confidence by investors was named the biggest negative consequence of the current situation within the dimension. Reduced financial resource. Government is characterized by management incompetence in terms of financial regulation and control over the functioning of the banking system.
Respondents mention that they do not have enough competencies and abilities to propose measures aimed at overcoming these problems as it is beyond their control. BoD pledged allocation of necessary resources.
In general, the table confirms that within the chosen methodology it is difficult to cover the influence of the external environment on the implementation of the GGB. The task is also
64
complicated by the fact that the current stage of incorporation of the guidelines can be still described as initial. Therefore, there are not enough pieces of evidence to track the success, challenges, and the methods of their overcoming conducted by the authorized organs in the Shamil Bank of Yemen & Bahrain. Similarly, the relative novelty of the changes in Yemen does not allow to compare the findings from the personal research with the literature devoted to the correlation of bank structure and the changes in operation after the successful implementation of Guidelines for Governance of Banks. 5.7 Corporate Governance Reporting at SBYB The author put some efforts trying to find SBYB corporate governance reports, and these efforts revealed important results. The author, while reviewing minutes of BoD and ExCom meetings for the years 2015 through 2017, found discussion and resolutions pertaining to the formation of the CG Committee and appointment of its members. In addition, BoD resolved to establish other two committees, namely Audit Committee and Risk Management Committee, but hold further activities due to the ongoing conflict in the country till further notice. The decision to hold further activities was indeed responsible because key members of these committees were thought to be experts from other Middle Eastern countries who cannot travel to war zone. Nevertheless, over the last three years, the CG Committee was able to develop and discuss the draft of the SBYB Corporate Governance Guidelines. The author noticed that the draft guideline has been in the agenda of the BoD for quite some time and waiting for final approval. It was quite obvious from analyzing these documents that the main driver behind taking actual steps on the GGB was the CBY circular and how to comply with such statutory requirements, yet the author here does not distrust the commitment and determination of board members in this respect. The author also observed no indication in the latest annual report 2016 to the progress of corporate governance practices in the bank vis-a-vis compliance with
65
Shari’a requirements for example, which was addressed in every Chairman’s report to the general shareholders annual meeting. However, as stated in CBY Circular No. (3) for the year 2013, it is clearly mandated that the BoD’s responsibility to a) approve its own corporate governance guidelines, b) publish it on the bank’s website, c) must be made available for public upon request, d) implementation progress status should also be declared in the annual report and finally, e) reasons for lack of implementation should be given, if any (Appendix-4, Part 3, paragraph d & e, translated CBY Circular 3/2013). The author believes that such regulatory requirements will be observed by SBYB in due course and as the guideline is being approved by the BoD.
5.8 Summary of the Chapter This chapter represents the conjoint analysis of the findings from the empirical (the combination of the primary and secondary data) and the theoretical parts of the conducted research. In general, it can be concluded that the information extracted from interviews and represented for the Shamil Bank of Yemen & Bahrain confirms the general trend of implementing the Guidelines for Governance of Islamic Banks. Moreover, this section once again proved the unity of the opinions of the senior management regarding the implementation of the GGB despite the existing limitations related to the access to the respondents and the ensuring diversity of respondents’ demographic characteristics. In addition, the chapter also shed light on the current reporting practices of corporate governance activities of SBYB revealed both the desire of the BoD to comply with regulators requirements and the desire to device best practices of governance. However, it important issue to notice that the limited relevant secondary sources devoted to the chosen topic, which indicates the initial stage of implementation of the GGB on the banking system in Yemen in general, and the specifically chosen bank in particular. It is also worth noting that the current
66
state of governance guidelines implementation complicates the analysis of the potential improvements in Islamic bank operation as well as an assessment of the challenges, especially those that come from the external environment.
67
Chapter 6 Conclusion
6.1 Introduction to the Chapter This is the final chapter of the dissertation. Its purpose is to establish the conclusions of the study, to make recommendations to the case study organization and to detail the directions for further research in this area. The chapter is structured as follows. In the first instance, the research questions and objectives are revisited and the conclusions that emerge from the study are detailed. Each is restated and then used to summarize the key findings that are pertinent to those questions, and to highlight where a contribution to knowledge and understanding has been made. Next, these conclusions recommendations are set out for action. Finally the chapter outlines the limitations of the research study and provides suggestions for future empirical analysis. 6.2 Research Questions, Objectives and Contributions 6.2.1Research question 1 The first research question was ‘What are the personal views and opinions of the board of directors and the senior management of the Shamil Bank of Yemen & Bahrain regarding the application and implementation of the Guidelines for the Governance of Banks?’. In general, the study found that overall, interviewees were positive about the GGB, and almost all of them were acquainted with, and in favour of observing its strict implementation.
In fact,
implementation had already begun with specific measures being established with support from the Board of Directors. However, it was noted that efforts to accomplish change had been severely affected by the political turmoil in the country.
68
6.2.2 Research question 2 The second research question that was posed at the outset of the study was ‘What are the benefits experienced by these individuals when it comes to implementing the GGB at the Shamil Bank of Yemen & Bahrain?’. The interviewees from the case study suggested multiple benefits arising from implementation of the new Guidelines. It was argued that compliance with the GGB would produce financial benefits for the bank in the future. In general, the GGB is believed to have improved transparency, governance, supervision, and to have increased the alignment between management, board of directors of the bank and the wider stakeholders 6.2.3 Research question 3 Thirdly, the study asked ‘What are the difficulties and challenges experienced by these individual, in the implementation of the GGB at the Shamil Bank of Yemen & Bahrain?’ As predicted at the outset of this study, this investigation has highlighted the considerable investment of time and resources that are involved in developing compliance with the provisions of the GGB. Interviewees in the study described a number of challenges associated with its implementation, including socio-cultural and political challenges, and challenges associated with acquiring the resources needed to ensure successful execution of the GGB practices. 6.2.4 Research question 4 Finally, the study posed the question: ‘What are the coping strategies adopted by these individuals (i.e. board of directors and senior management) to deal with the challenges arising from implementation of the GGB at the Shamil Bank of Yemen & Bahrain?’ The redistribution of resources (including financial resources), was identified to be a key strategy for ensuring the efficient inclusion of the new Guidelines and generally, the participants in the study expressed optimism about the steps that the boards was taking. Respondents did acknowledge that the political circumstances in the Republic of Yemen were beyond their individual control, but they did report organizing interventions and measures 69
focused on social reform and awareness, and effective redistribution of the available resources. 6.2.5 Conclusions and contribution to knowledge The primary objectives of this research were to evaluate the views and opinions of the board of directors as well as the management of the Shamil Bank of Yemen and Bahrain towards the application and the implementation of the Guidelines for the Governance of Banks (GGB). In addition, the research study was designed to explore the various benefits gained from the implementation of the guidelines, to identify the difficulties and challenges faced, as well as any coping strategies employed by management at the bank. Overall, interviewees were positive about the Guidelines and almost all of them were acquainted with, and in favour of observing its strict implementation. In fact, implementation had already begun with specific measures being established with support from the Board of Directors. However, it was noted that efforts to accomplish change had been severely affected by the political turmoil in the country. Interviewees also indicated their belief that compliance with the GGB had benefited the bank, although they did indicate that any financial benefits will take some time to be realized. As expected, the majority of participants in this study believe that GGB is in line with Islamic banking principles, and that the corporate governance arrangements that are in place are responsible for Islamic banks being least affected by the financial crisis of 2007 - 2009. In addition, the GGB is believed to have improved transparency, governance, supervision, and to have increased the alignment between management, board of directors (BoD) and the wider stakeholders of the bank. Finally, the majority of participants admit facing numerous internal, social, cultural and political difficulties that have, to date hampered the smooth enactment of the guidelines. The positive thing is that the participants, who are also decision makers, expressed their clear
70
intention to spare no efforts to support the application of the GGB and to allocate to its implementation all resources needed. To date, the author is aware of no empirical study has assessed the impact that the new guidelines have had upon banks operating in Yemen. Furthermore, no study has sought to gather data on the challenges associated with the implementation of the guidelines from the perspective of key personnel. The findings that have been reported herein therefore constitute a contribution to knowledge.
6.3 Recommendations for action Drawing on the results of this research study, the author proposes a number of recommendations for action which are directed towards two specific groups: 1) to the board of directors of the Shamil Bank of Yemen & Bahrain, and 2) to the regulatory body represented by the Central Bank of Yemen (CBY). The recommendations are detailed as follows: a) Recommendations to the board of directors of the Shamil Bank of Yemen & Bahrain: -
Independent board members should be recruited to the current board as early as is viable
-
The diversity of the current board (in terms of geographical and demographic backgrounds) must be maintained
-
The SSB should be reformed in order to attract more experienced and knowledgeable members.
-
Investment in training and exchange programs for members of the SSB should be made
-
The board secretary should be released from any management duties so that he is wholly dedicated to board secretary responsibilities and to work relating to the board committees.
b) Recommendations to regulators:
71
-
Independent board members should be encouraged through regulatory and legislative action
-
SSB members should be held to be liable for any adverse rulings (fatwa)
-
The purpose and identity of the IFI is not clearly stated and it is generally believed that the company is the property of the shareholders. Therefore, it is recommended that the Central Bank of Yemen encourage IFIs to iterate this in their mission statement.
6.4 Limitations of the Study Saunders et al. (2015) pointed out that however well designed and executed a research investigation, there will always be weaknesses and flaws. It is therefore important to report and reflect upon the limitations of the study before ending the dissertation. It is important to note that a case study approach was employed in the undertaking of the research (Maby, 2008). As described in the methodology chapter (chapter 3), one of the main benefits of this approach is that it enables the researcher to examine the issue of interest in great depth in a single site of study. However, the limitations of this approach must also be recognized. Since the research was conducted in the Shamil Bank of Yemen & Bahrain, the results of the study should be seen as being applicable to this bank, only. Other banks may have a different experience in implementing the provisions of the Guidelines for the Governance of Banks. Therefore, the results that have been reported herein should not be considered to be widely generalizable. The initial target sample size was 15 interviewees, which the author believed was an appropriate figure to enable successful realization of the aims and objectives of the study. However, ultimately, only nine interviews could be conducted. The failure to achieve the stated target was due to the inability of the researcher to reach and contact all of the targeted individuals. The sample could have been larger if other board members of other Islamic banks were
72
approached, but that was not deemed to be possible given the current political and security situation. Another limitation is related to the representativeness of the sample. All of the interviewees were male. This is attributed to the male-dominated composition of the board and senior management. There are, however, some women in management roles (although not in senior positions), and it is possible that their viewpoints could be different from those of their male counterpart. Notwithstanding above limitations, the study reached conclusions that are consistent with the academic literature, and therefore, it is suggested that the conclusions and recommendations that have been indicated above will be of value to the board of directors and the management of the bank.
73
6.5 Further Research in this Area This was a small scale, exploratory research study, and it should not be expected that all issues can be fully covered. Therefore, it is suggested that further research be undertaken in this area. More specifically, the researcher has identified three areas in which further research can be justified:
When studying the corporate governance practices of banks in Yemen, a wider sample of Islamic and conventional banks, as well as insurance companies (both Takaful and non-Takaful versions) should be included
Further research is necessary in order to shed light on the role of women at the board level and in senior management of Yemeni banks.
Further studies on the composition, structure, performance and interactions of the Shari’a Supervisory Board (SSB) is desirable.
6.6 Summary of the Chapter This chapter has concluded the research dissertation. The research questions have been met and a contribution to knowledge established. While the dissertation does have weaknesses, in general, conclusions are reached that are consistent with the corporate governance literature, and on that basis, recommendations have been supplied that will be of value to the board of directors and the management of the bank
74
References Abedifar, P., Ebrahim, S.M., Molyneux, P. and Tarazi, A, 2015, ‘Islamic banking and finance: recent empirical literature and directions for future research’, Journal of Economic Surveys, vol. 29 no. 4, pp. 637-670. Abu-Tapanjeh, A.M., 2009, ‘Corporate governance from the Islamic perspective: A comparative analysis with OECD principles’, Critical Perspectives on Accounting, vol. 20 no. 5, pp.556-567. Agrawal, A., & Chadha, S. 2005, ‘Corporate governance and accounting scandals’, The Journal of Law and Economics, vol. 48, no. 2, pp. 371-406. Ahmed, S.U., Ullah, G.W., Ahmed, S.P. and Rahman, A., 2016, ‘An Empirical Study on Corporate Governance and Islamic Bank Performance: A Case Study of Bangladesh’, International Journal of Finance & Banking Studies, vol. 5, no. 4, p.1. Ali, S., & Kelly, M 2012, ‘Ethics and social research. In Seale, C. (Ed.)’, Researching society and culture. London: Sage Al-Olofi, N 2011, ‘To what extent to which bank governance is applied in the Republic of Yemen’. Available online from: http://srv1.eulc.edu.eg/eulc_v5/Libraries/Thesis/BrowseThesisPages.aspx?fn=PublicDrawThe sis&BibID=11741059 Al-Saidi, M. and Al-Sammari, B 2013, ‘Board composition and bank performance in Kuwait: an empirical study’, Managerial Auditing Journal, vol. 28, no. 6, pp. 472-494. Alhojailan, M.I 2012, ‘Thematic analysis: A critical review of its process and evaluation’, West East Journal of Social Sciences, vol. 1, no. 1, pp.39-47. Ayedh, A.M., Echchabi, A. and Alnahari, A.A 2014, ‘Islamic Banking in Yemen in Light of the Arab Uprising: An Empirical Study from Customers' Perspective’, Journal of Applied Sciences, vol.14, pp.3001-3007. Bamaged, M 2011, ‘Managers of Yemen companies’ extent commitment by applying standards of corporate governance’, Faculty of Administrative Sciences, University of Aden, Yemen. Baxter, P., & Jack, S 2008, ‘Qualitative case study methodology: Study design and implementation for novice researchers’, The Qualitative Report, vol. 13, no. 4, pp. 544-559. Benbasat, I, Goldstein, D and Mead, M 1987, ‘The Case Research Strategy’, MIS Quarterly vol. 11, no. 3, pp. 369-386 Bryman, A, & Bell, E 2015, Business research methods. Oxford: Oxford University Press Bitsch, V 2005, ‘Qualitative research: A grounded theory example and evaluation criteria’, Journal of Agribusiness, vol. 23, no. 1, pp. 75-91. Blair, M. M 1996, ‘Ownership and control: Rethinking corporate governance for the twentyfirst century’ - Harvard Law Review, vol. 109, no. 5, pp. 1150-1155
75
Bukair, A.A. and Abdul Rahman, A 2015, ‘Bank performance and board of directors attributes by Islamic banks’, International Journal of Islamic and Middle Eastern Finance and Management, vol. 8, no. 3, pp. 291-309. Cadbury Sir Adrian 1992, Report of the Committee on the Financial Aspects of Corporate Governance, London: Burgess Science Press. Carter, S. & Little, M 2007, ‘Justifying knowledge, justifying method, taking action: Epistemologies, methodologies, and methods in qualitative research’, Qualitative Health Research, vol. 17, no. 10, pp. 1316-1328. Clarke, V and Braun, V 2013, ‘Teaching thematic analysis: Over-coming challenges and developing strategies for effective learning’, The Psychologist, vol. 26, no. 2, pp. 120-123 Claessens, S 2006, ‘Corporate governance and development. The World Bank research observer, vol. 21, no. 1, pp.91-122, https://doi.org/10.1093/wbro/lkj004 Cohen, L, Manion, L & Morrison, K 2011, Research methods in education. New York, NY: Routledge. Creswell, JW 2014, ‘Research design qualitative, quantitative, and mixed methods approaches’, 4th Ed. Thousand Oaks, CA: SAGE Publications. Crotty, M 1998, The foundations of social research: Meaning and perspective in the research process. London: Sage. Curtis, S, Gesler, W, Smith, G & Washburn S 2000, ‘Approaches to sampling and case selection in qualitative research: examples in the geography of health’, Social Science & Medicine, vol. 50, no. 7–8, pp. 1001–1014. De Haan, J, & Vlahu, R 2016, 'Corporate Governance of Banks: A Survey', Journal Of Economic Surveys, vol. 30, no. 2, pp. 228-277 DiCicco‐Bloom, B, and Crabtree, B.F 2006, ‘The qualitative research interview’, Medical education, vol. 40, no. 4, pp. 314-321. Easterby-Smith, M, Thorpe, R & Jackson, P 2012, Management research. London: SAGE Publications. Etikan I, Musa S.A, and Alkassim R.S, 2015, ‘Comparison of Convenience Sampling and Purposive Sampling’, American Journal of Theoretical and Applied Statistics, vol. 5, no. 1, pp. 1-4. Farag, H, Mallin, C, & Ow-Yong, K 2017, 'Corporate governance in Islamic banks: New insights for dual board structure and agency relationships', Journal Of International Financial Markets, Institutions & Money, ScienceDirect, EBSCOhost, viewed 11 October 2017. Ghaffar, A 2014, ‘Corporate Governance and Profitability of Islamic Banks Operating in Pakistan’, Interdisciplinary Journal of Contemporary Research in Business, pp.320-336. Ghayad, R 2008. ‘Corporate governance and the global performance of Islamic banks’, Humanomics, vol. 24, no. 3, pp. 207-216.
76
Gill, P, Stewart, K, Treasure E and Chadwick B 2008, ‘Methods of data collection in qualitative research: interviews and focus groups’, British Dental Journal, vol. 204, no. 6, pp. 291-295. Ginena, K (2014), 'Sharī‘ah risk and corporate governance of Islamic banks’, Corporate Governance, vol. 1, p. 86 Graneheim, U.H, & Lundman, B 2004, ‘Qualitative content analysis in nursing research: Concepts, procedures and measures to achieve trustworthiness’, Nurse Education Today, vol. 24, no. 2, pp. 105-112. Grassa, R 2015, ‘Shariah supervisory systems in Islamic finance institutions across the OIC member countries: An investigation of regulatory frameworks’, Journal of Financial Regulation and Compliance, vol. 23, no. 2, pp. 135-160. Guba, E.G. and Lincoln, Y.S 1994, ‘Competing paradigms in qualitative research’, Handbook of Qualitative Research, vol. 2, no. 163-194, pp.105. Guidelines for the Governance of Banks in Yemen)GGB(2013 , Available from: http://www.ybc-yemen.com/about/publications Haider, N, Khan, N and Iqbal, N 2015, ‘Impact of corporate governance on firm financial performance in Islamic Financial Institution’, International Letters of Social and Humanistic Sciences, vol. 51, pp.106-110. Hakim, S.R 2002, ‘Islamic banking: challenges and corporate governance’, In LARIBA Conference Pasadena, CA, vol. 30. Hamza, H 2013, ‘Sharia governance in Islamic banks: effectiveness and supervision model', International Journal of Islamic and Middle Eastern Finance and Management, vol. 3, pp. 226 Hasan, Z 2011, ‘A survey on Shari'ah governance practices in Malaysia, GCC countries and the UK: Critical appraisal’, International Journal of Islamic and Middle Eastern Finance and Management, vol. 4, no. 1, pp. 30-51. IFSB (Islamic Financial Services Board) (2015), Islamic Financial Services Industry Stability Report 2015. Kuala Lumpur: IFSB. Imam, P and Kpodar, K 2016, ‘Islamic banking: Good for growth?’, Economic Modelling, vol. 59, pp.387-401. Jesson, J, Matheson, L, & Lacey, F.M 2011, Doing your literature review: traditional and systematic techniques. Sage. Kerlinger, F.N 1979, Behavioral research: A conceptual approach. New York, Holt, Rinehart, and Winston Kammer, M.A, Norat, M.M, Pinon, M.M, Prasad, A, Towe, M.C.M, and Zeidane, M.Z 2015, ‘Islamic finance: Opportunities, challenges, and policy options’, International Monetary Fund (No. 15).. Kendra, C 2013, ‘What Is a Cross-Sectional Study?’, Available from: http://psychology.about.com/od/cindex/g/cross-sectional.html; Retrieved on : 6.11.2017 77
Khuram Shahzad Bukhari, Hayat M. Awan, Faareha Ahmed 2013, ‘An evaluation of corporate governance practices of Islamic banks versus Islamic bank windows of conventional banks: A case of Pakistan’, Management Research Review, vol. 36, no. 4, pp. 400-416. Kirkpatrick, G 2009, ‘The corporate governance lessons from the financial crisis’, OECD Journal: Financial Market Trends, vol. 1, pp.61-87. Koch, T 2006, ‘Establishing rigour in qualitative research: The decision trail’, Journal of Advanced Nursing, vol. 53, no. 1, pp. 91-100. doi: 10.1111/j.13652648.2006.03681.x Lambert V.A and Lambert C.E 2012, ‘Qualitative Descriptive Research: An Acceptable Design’. Pacific Rim International Journal of Nursing Research, vol. 16, no. 4, pp 255-256. Laub, Z 2016, ‘Yemen in crisis. Council on Foreign Relations’, Available from: https://www.files.ethz.ch/isn/190632/Backgrounder_%20Yemen's%20Ci...pdf (Accessed 15 June 2017). Mabry, L 2008, ‘Case study in social research. In Alasuutari, P, Brinkman, L & Brannen, J (eds). SAGE Handbook of Social Research Methods, pp. 214-227. Thousand Oaks, CA: Sage. Marks, D.F and Yardley, L 2004, Research Methods For Clinical And Health Psychology. London: Sage. Miles, M.B and Huberman, A.M 1994, Qualitative data analysis: An expanded sourcebook. Sage Publications. Misangyi, V.F and Acharya, A.G 2014, ‘Substitutes or complements? A configurational examination of corporate governance mechanisms’, Academy of Management Journal, vol. 57, no. 6, pp. 1681-1705. Mollah, S, Hassan, K, Al Farooque, O, & Mobarek, A 2017, ‘The governance, risk-taking, and performance of Islamic banks’, Journal of Financial Services Research, vol. 51, no. 2, pp. 195– 219. http://doi.org/10.1007/s10693-016-0245-2 Namey, E, Guest, G, Thairu, L, and Johnson, L 2008, ‘Data reduction techniques for large qualitative data sets’, Handbook for team-based qualitative research, vol. 2, pp.137-161. OECD (2015), G20/OECD Principles of Corporate Governance. Paris: OECD Publishing OECD/G20 Principles of Corporate Governance Updated 2015, Board Leadership, vo. 142, pp. 4. OECD 1999. Principles of Corporate Governance. Paris: OECD. (2009). ‘Corporate governance and the financial crisis: key findings and main messages’, available at: http://www.oecd.org/corporate/ca/corporategovernanceprinciples/43056196.pdf. (Accessed 11 July 2017). Palinkas, L.A, Horwitz, S.M, Green, C.A, Wisdom, J.P, Duan, N, and Hoagwood, K 2015, ‘Purposeful sampling for qualitative data collection and analysis in mixed method implementation research’, Administration and Policy in Mental Health and Mental Health Services Research, vol. 42, no. 5, pp. 533-544. Racha G 2008, ‘Corporate governance and the global performance of Islamic banks’, Humanomics, vol. 24, no. 3, pp. 207-216 78
Razak, A.H.A 2015, ‘The fundamentals of Islamic banking and finance: A rologue’, European Journal of Islamic Finance, vol. 2. Rihab, G, & Hamadi, M 2014, 'Corporate governance of Islamic banks : A comparative study between GCC and Southeast Asia countries', International Journal Of Islamic And Middle Eastern Finance And Management, vol. 3, pp. 346, Emerald Insight, EBSCOhost, viewed 14 June 2017. Ritchie, J., Lewis, J., Nicholls, C.M. and Ormston, R. eds., (2013). Qualitative research practice: A guide for social science students and researchers. Sage. Ritchie, J and Spencer, L 2002, ‘Qualitative data analysis for applied policy research’, The qualitative researcher’s companion, vol. 573, pp. 305-329. Saidi, N 2004, ‘Corporate governance and business ethics in Lebanon. Keynote speech on occasion of the launch of the RDCL Code of Business Ethics’, Beirut, Lebanon. Samra, E 2016, Corporate governance in Islamic financial institutions. The University of Chicago Law School International Immersion Program Papers, No. 22. Available at: http://chicagounbound.uchicago.edu/international_immersion_program_papers/20/ (Accessed 21 June 2017). Saumure, K and Given L.M 2008, ‘Convenience Sample’, In The SAGE Encyclopedia of Qualitative Research Methods. Thousand Oaks, CA: Sage. Saunders, M, Lewis, P & Thornhill, A 2012, Research methods for business students. London: Palgrave Seymour, W.S 2001, ‘In the flesh or online? Exploring qualitative research methodologies’, Qualitative Research, vol. 1, no. 2, pp. 147–168. Solovieva, D 2015, ‘Feeding Frenzy for Sukuk’, Retrieved February 22, 2018, from http://businessweekme.com/2014/10/08/feeding-frenzy-for-sukuk/ (Accessed 1 March 2018) Sulaiman Abdullah Saif, A, & Joriah, M 2012, 'Introduction to corporate governance from Islamic perspective', Humanomics, vol. 3, pp. 220 Sun, W, Stewart, J, and Pollard, D 2011, ‘Introduction: rethinking corporate governance – lessons from the global financial crisis’, International Perspectives, pp.1-21. Thanh N.C. and Thanh T.T.L 2015, ‘The Interconnection between interpretivist paradigm and qualitative methods in education’, American Journal of Educational Science, vol. 1, no. 2, pp. 24-27. The Economist. 2017, Big Interest, No Interest. [ONLINE] Available https://www.economist.com/news/finance-and-economics/21617014-market-islamicfinancial-products-growing-fast-big-interest-no-interest. (Accessed 8 July 2017).
at:
Thomas, J, and Harden, A 2008, ‘Methods for the thematic synthesis of qualitative research in systematic reviews’, BMC Medical Research Methodology, vol. 8, no. 1, pp.45. Tracy, S.J 2012, Qualitative research methods: Collecting evidence, crafting analysis, communicating impact. John Wiley & Sons.
79
Tricker, R.B & Tricker, R. I 2015, Corporate governance: Principles, policies, and practices. Oxford: Oxford University Press Usmani, T 2004, An introduction to Islamic finance. Arham Shamsi. Willis, J.W and Jost, M 2007. Foundations of qualitative research: Interpretive and critical approaches. Sage. Wolfensohn. Financial Times, 21 June 1999. Cited by the Encyclopedias of Corporate Governance in the Article on “What is Corporate Governance”. (www.encycogov.com); 11 July 2001. p. 1. Yemen faces financial crisis with corporate governance. (2009). Center for International Private Enterprise, [online] Overseas Report (41 Summer 2009), p.5. Available at: https://www.cipe.org/legacy/publication-docs/OverseasREPORT%20no.%2041.pdf [Accessed 10 Mar. 2018]. Yin, R.K 2003, ‘Case study research: design and methods (3rd, revised edn)’. Thousand Oaks (CA): Sage. Zainab, B, & Mustapha, H 2016), 'An Overview of Corporate Governance Practices of Selected Islamic Banks', Tsaqafah, vol. 12, no. 1, pp. 1-18 Zainal, Z 2007, ‘Case study as a research method’, Journal Kemanusiaan, vol. 9. Available from: http://www.management.utm.my/jurnalkemanusiaan/attachments/article/163/JK9_163.pdf (Accessed 16 July 2017). Zikmund, W.G, Babin, B.J, Carr, J.C and Griffin, M 2013, Business research methods. Cengage Learning. Zulkifli, H 2011, 'A survey on Shari'ah governance practices in Malaysia, GCC countries and the UK : Critical appraisal', International Journal Of Islamic And Middle Eastern Finance And Management, vol. 1, p. 30.
80
Appendices Appendix 1: Sample Informed Consent Form
81
Appendix 2: Sample Request for Interview
82
Appendix 3: Sample Interview Questions
83
84
85
86
87
Appendix 4: Translated CBY Circular No. (3) for Year 2013
88
89
![Dissertation thesis [draft title] - MADOC](https://m.moam.info/img/260x300/dissertation-thesis-draft-title-madoc_59bcbeb81723ddc9c97ec695.jpg)
![Dissertation Draft 10 - The Taos Institute [PDF]](https://m.moam.info/img/260x300/dissertation-draft-10-the-taos-institute-pdf_647dea36098a9e36518b45da.jpg)
