Does Corporate Governance Model of Interest-Free Banks Provide Better Protection Against Financial Crisis? Empirical Investigation on Corporate Governance Perspectives of the Interest-Free Banks Globally

The Financial Crisis Inquiry Report (FCIC, 2011) concludes, inter alia, that dramatic failures of corporate governance and risk management at many systematically important financial institutions coupled with a systematic breakdown in accountability and ethics were responsible for the financial crisis of 2008-10. Banking system globally halted during crisis but Interest-free Banks were not exposed and none of them needed government recapitalization. In this regard, Chapra (2010b) document that the resiliency of the Interest-free Banks was tremendous during crisis. The purpose of this study to test whether a multi-layer corporate governance model instituted by the interest-free banking system and the supposed adherence to ethical behavior which is, at least theoretically, the cornerstone of Interest-free banking offer a protection against its fallibility to financial crises like the one in 2008-10. Using a sample of 42 interest-free banks from Bangladesh, Bahrain, Malasia, and United Ara