Relationship of Islamic Bank’s Profitability with Corporate Governance Practices

Abstract

This research has been done to find the impact of good corporate governance practices on the profitability of Islamic banks. The main objective of this study is to identify the impact of corporate governance on the profitability of Islamic banks of Pakistan. The corporate governance measures used are ethics and corporate social responsibility. The profitability is measured through the ratios of return on assets (ROA) and return on equity (ROE). The sample used for the study was Islamic banks of Pakistan. A well-designed, structured and verified questionnaire was used to collect data. Data was analyzed by using regression analysis. The findings of the study revealed that all these variables of corporate governance have a significant relationship with the profitability of the banks. The profitability of Islamic banks of Pakistan tends to increase with the adoption of good corporate governance practices. Thus better profitability can be achieved by using good corporate governance practices and by being more ethical and by working for society. The study was limited in terms of time and small sample size. The future prospects of the study are wide.