Professional Documents
Culture Documents
A series of global financial crisis and economic recession for the past three decades have
encourage economists world-wide to consider for an alternative financial solution.
Globally this has attracted attention to focus on Islamic banking and finance as an
alternative model. However, according to Chapra and Ahmed (2002) the primary of the
new architecture that has received maximum emphasis so far at international forums, is
improved corporate governance reinforced by prudential regulation and supervision.
While these will certainly help in enhancing the soundness and stability of the financial
system, they will not be sufficient.
The increased globalization of financial and Islamic products markets has raised the
interest of both market participants and regulators in the quality of financial reporting
worldwide. As a result, Islamic financial institutions are required to increase the
corporate governance (CG) and disclosing such actions in their annual reports because it
may reduce the information irregularities between the management of the Islamic banks
and the shareholders. According to Kothari (2000), reduced information asymmetry has
desirable effects on the cost of capital and the volatility of security prices. These benefits
motivate regulators around the world to strive for high quality.
In addition, with more governance related disclosure aids reflected in the financial
reports would foster more transparent and accuracy in the present and future
performance of the respective Islamic banks. Disclosure aids in the financial reports will
assist all stakeholders to monitor the Islamic banks performance and to avoid existing
problems remain unnoticed and which could lead to financial failure in the future.
To examine the performance measures for board of directors and management for both
Malaysian and Foreign Islamic Financial Institutions.
ii) To examine the organization structure and functions for both Malaysian and Foreign
Islamic Financial Institutions.
The study seeks to understand the disclosure of corporate governance and management
decision making reflected in the financial reports between Malaysian and Foreign
Islamic Financial Institutions.
4.1 Limitations
The researcher may encounter obstacles while conducting this study. The obstacles
come in many forms. The first potential obstacle would be on the data gathering during
interview, where all bankers are required to abide by the rules and regulations spelled
out in the Banking and Financial Institution Act (BAFIA) 1989 which prevents the
interviewee from revealing certain details to a third party even for the benefit of this
research. However, to be as confidential as possible and to avoid any doubts or dispute
as to the authenticity of the data, respective parties within the University may have
verified the details and analysis computed. In addition, the researcher also faced some
constraints as some the employees of the Malaysian and Foreign Islamic Financial
Institutions may not want their names to expose in the research report based on the
interviews conducted by the researcher.