The Impact of Shariah Compliance and Risk Management on Financial Performance: The Mediating Role of Operational Efficiency in Islamic Financial Institutions

Authors

  • Dr. Shrafat Ali Sair Hailey College of Commerce, University of the Punjab Lahore
  • Dr. Aamir Sohail Department of Commerce, Thal University Bhakkar
  • Dr. Shuja’at Saleem Faculty of Business Administration, IQRA University, Karachi, Pakistan
  • Muhammad Mubeen Faculty of Business Administration, IQRA University, Karachi, Pakistan
  • Dr. Hasan Raza Department of Commerce, University of Karachi, Pakistan

Keywords:

Shariah Compliance, Risk Management

Abstract

The purpose of this study is to analyze the relationship between Shariah compliance and risk management practices on the financial performance of Islamic financial institutions with the mediating role of operational efficiency. Data was collected from Islamic financial institutions’ managers and the proposed relationships were analyzed by means of Partial Least Squares Structural Equation Modeling (PLS-SEM). The results shows that shariah compliance and risk management practices significantly effect on the financial performance of Islamic financial institutions. Furthermore, the results indicated that operational efficiency has a strong mediating role in the relationship between Shariah compliance, risk management, and financial performance. This research offers implications for both scholars and professionals as it reveals that improving operational performance can improve the financial performance of IPIs while following the Shariah and controlling risks.

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Published

2024-09-30

Issue

Vol. 4 No. 3 (2024): GISRAS Journal of Management & Islamic Finance (GJMIF)

Section

Articles