Perceived Shariah Governance Quality and Dual Performance: Survey Evidence from Bank Syariah Indonesia

Abstract

Purpose: Despite growing emphasis on Shariah governance in Islamic banking, limited empirical evidence explains how governance creates social and financial value. This study examines the direct and indirect relationships between Perceived Shariah Governance Quality (PSGQ), Perceived Social Performance (PSP), and Perceived Financial Performance (PFP), focusing on the mediating role of PSP.Research Methodology: A quantitative cross-sectional survey was conducted among 109 employees of Bank Syariah Indonesia (BSI) across six organisational functions using purposive sampling. Data were analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) to examine structural relationships and mediation.Results: PSGQ strongly positively affects PSP (β = 0.880) and has a significant direct effect on PFP (β = 0.376). PSP positively influences PFP (β = 0.440) and partially mediates the relationship between PSGQ and PFP (indirect β = 0.387; VAF ≈ 50.7%), indicating complementary partial mediation.Conclusions: Shariah governance creates organisational value through two reinforcing pathways: directly by strengthening organisational capability and indirectly by enhancing social performance, which subsequently contributes to financial performance.Limitations: The single-bank, cross-sectional design and same-source perceptual measures limit causal inference and generalisability. Common method variance remains possible because all constructs were measured from the same respondents at one time.Contribution: This study demonstrates the complementary mediating role of social performance within BSI and integrates Shariah Governance Theory, Stakeholder Theory, and Maqāṣid al-Sharīʿah into a value-based perspective on Shariah governance.