The impact of Islamic Financial Services Board Standard No. 3 on corporate governance of listed firms in Kuwait

This paper investigates whether corporate governance standard No. 3 that has been issued by Islamic Financial Services Board (IFSB-3) has improved corporate governance structure of firms listed in the Kuwait stock market. In addition, the paper investigates whether the influence of IFSB-3 on corporate governance varies between Islamic and conventional financial institutions. We test two hypotheses using a sample of firms listed in Kuwait stock exchange over a period of 2000–2013. Ordinary least square regression and fixed effects estimation techniques are applied to test the hypotheses. The findings reveal all corporate governance measures indicate that the corporate governance has improved after the issuance of IFSB-3. The results also reveal that the improvement in corporate governance after the implementation of IFSB-3 is higher for Islamic than for conventional financial institutions. This suggests that IFAB-3 is more important for Islamic than conventional institutions. Accordingly, we conclude that corporate governance guideline (IFAB-3) has improved the corporate governance structure of firms listed in the Kuwait stock market. In this context, the study increases the awareness of standard setters, academics, investors, regulators, and many other stakeholders about the effect of IFAB-3 in the region. Finally, our study fills evident gap in the literature by investigating the influence of corporate governance guideline (IFSB-3) on corporate governance structure in a unique setting that is often ignored by accounting scholars, which helps to widen our knowledge on accounting practices across the globe