Board Characteristics and Cost Efficiency in Improving Performance of Sharia Banks: Evidence from Indonesia

Abstract

An analysis of business performance in the Islamic banking industry is carried out to guarantee and evaluate that all forms of company activities are in accordance with the corridors and provisions of sharia. This study aims to explain the influence of board characteristics on cost efficiency and the impact on Islamic bank performance using 33 Islamic bank in Indonesia as the sample. The variables included board characteristics measured through board leadership and board size, cost efficiency which was measured through throughput activities and cycle efficiency, and Islamic bank performance as measured by capital asset quality, profit margin, earnings, and liquidity. The research method in this study is Partial Least Square (PLS). The results showed that board characteristics had a significant effect on cost efficiency and Islamic bank performance, while cost efficiency also significantly influenced Islamic bank performance. Board Characteristics has a higher influence on Islamic bank performance compared to cost efficiency.