Abstract

After the outbreak of financial crises in the Asian countries, a great attention was given on improving the corporate governance (CG) practices, and a number of studies were conducted to explain the influence of CG on the bank’s performance. The CG reforms were implemented and enforced to protect the interest of the shareholders and other stakeholder.Existing literature has focused on the influence of CG practices and its influence on the non- financial firms. There is a dearth of literature on the effect of CG on Islamic financial institutions, particularly Islamic banks, which have to comply not only with the CG principles but also with the Islamic Shari’ah principles. This study examines the influence of CG practices and the Shari’ah supervision on the performance of Islamic banks in Pakistan from 2012-2015. The Shari’ah board performs either supervisory or advisory role. The findings suggest that Shari’ah boards in the supervisory position positively affect the performance; however, the effect on the performance is not significant when the board has an advisory role. The finding also suggests the board size, board independence and CEO duality affect the performance of Islamic banks in Pakistan.