Do Islamic banks use institutional theory in the light of Shariah governance? Empirical evidence from a Muslim dominant country

The present paper examines the application of institutional theory (hereafter IT) mechanisms (isomorphism and legitimacy) in Shariah governance (henceforth SG) practices and in operations, as it best illuminates the operational guidelines and procedures for the Islamic banks to attain legitimacy. More specifically, the study aims to empirically explore the SG of Islamic banks in Bangladesh from the viewpoint of IT mechanisms. The study applied a qualitative case study method and a semi-structured face-to-face (individual) interview with various stakeholders connected with Bangladesh's Islamic banks and SG practices. The study finds that Islamic banks face pressure from the administration, regulators, and government in performing their activities and functions. More importantly, most Islamic banks replicate one leading Islamic bank, which indicates the presence of mimetic or cultural-cognitive isomorphism. Conversely, normative pressure covers the existing practicing environment, people's social awareness, knowledge, willingness, and accountability of the Board of Directors (BOD) towards the people concerning Shariah compliance with policymaking. Moreover, socio-political norms, regulations, and corruption influenced policymaking, preparation of SG guidelines, and their implementation. The study significantly contributed to national regulatory bodies by exploring the presence of significant pressures on diverse stakeholders. The study has several policy contributions for the Islamic banks and the Central Bank of Bangladesh. Notably, the study will help global regulatory bodies and policymakers minimize multifaceted pressures, improve SG practices, and enhance the quality of Shariah compliance.