Unveiling Banking Corporate Governance: Comparative Analysis of European Conventional Banks and Gulf Islamic Banks

Abstract

This thesis aims at investigating at what extent different corporate governance models impact banks financial performance. By analysing the essence of Islamic Corporate Governance and the main differences between the Islamic Banking model and the Conventional Banking model, the study underlines the ideological disparities of the two models and the perception of interest in Islamic banks. To deepen the analysis, two geographical area were identified, namely Europe and the Gulf Cooperation Council (GCC). By comparing Conventional European banks and Gulf Islamic Banks these two realities, an econometric model was created. The model explores the impact of five corporate governance variables, including board size and independent directors, on the Return on Equity (ROE) of 38 listed banks, 19 Islamic banks and 19 Conventional Banks over a period of 8 years, from 2015 to 2022. The analysis reveals the similarities and the disparities in governance structures between these two distinct banking models and shows the impact of corporate governance changes on the overall dependent variable (ROE). The findings provide valuable insights to comprehend the system in which Muslims operate, considering primarily the role played by the religion. In addition, the study has the final purpose of considering the possibilities of introducing Islamic financial services in European countries and offering future pathways to foster the research in this field.