The Influence of Ethical Leadership on Financial Performance and Human Resource Satisfaction in Islamic Banking Institutions

Yofy Syarkani

doi:10.54783/influencejournal.v7i1.287

Authors

Yofy Syarkani Universitas Langlangbuana, Bandung, Indonesia

DOI:

https://doi.org/10.54783/influencejournal.v7i1.287

Abstract

This literature review explores the influence of ethical leadership on financial performance and human resource satisfaction within Islamic banking institutions. Ethical leadership, grounded in principles of integrity, fairness, and accountability, is increasingly recognized as a critical determinant of organizational outcomes. The review synthesizes findings from peer-reviewed articles published over the past decade, focusing on empirical studies within Islamic financial contexts. Results indicate that ethical leadership positively correlates with improved financial performance, largely through enhanced stakeholder trust, risk mitigation, and reputational strength. Additionally, employee satisfaction appears to be significantly influenced by leaders who demonstrate ethical conduct, transparency, and alignment with Islamic values. The analysis further highlights that ethical leadership in Islamic banking institutions is often reinforced by Sharia principles, creating a unique cultural and normative framework. However, discrepancies in implementation practices and measurement approaches remain notable across institutions and regions. This study identifies theoretical gaps and calls for more integrated models that link ethical leadership with performance metrics and employee well-being in Islamic finance. It also emphasizes the need for cross-cultural and longitudinal studies to capture the dynamic nature of leadership ethics. The review offers strategic implications for policymakers and banking executives seeking to strengthen institutional sustainability and ethical governance.

References

Abbas, A., & Tan Owee Kowang. (2020). Impact of Ethical Leadership and Islamic Work Ethics on Employee Commitment and Job Satisfaction. Journal of Research in Psychology, 2(2), 47–58.

Abdulrahman, K., & Osei, K. A. (2022). Contextual determinants of ethical leadership effectiveness in Islamic banks: Evidence from West Africa. Journal of Business Ethics, 175(4), 945–960.

Aithor. (n.d.). The impact of ethical leadership on stakeholder trust. ESG Sustainability Directory.

Alam, S., & Ismail, I. (2024). Holistic leadership development in Islamic finance: Integrating ethics, performance, and governance. Journal of Islamic Business and Finance, 9(1), 15–30.

Al‑Homaidi, E. A., Al‑Matari, E. M., Anagreh, S., Tabash, M. I., & Mareai Senan, N. A. (2021). The relationship between zakat disclosures and Islamic banking performance: Evidence from Yemen. Banks and Bank Systems, 16(1), 52–61.

Almutairi, M. A. O. J., Almutairi, A. A. O. J., Almarri, A. S. S., & Almutairi, B. A. K. H. M. (2020). Ethical leadership impact on turnover of Islamic banks in Kuwait. International Journal of Business and Management, 15(1), 77–89.

Amaliasita, M., & Astuti, R. J. (2023). Islamic Work Ethic and Employee Performance: The Role of Job Satisfaction as a Mediator. International Journal of Islamic Business Ethics, 8(2), 83–93.

Anonymous. (2023). The impact of ethical leadership on firm performance in Bahrain. Journal of Business Ethics & Leadership, 2(4), 483–490.

As Sahara, M. A., & Setiawan, D. (2022). The effect of ethical values on Islamic banking performance. Corporate & Business Strategy Review, 3(2), 34–42.

Astuti, A. R. T. (2024). Islamic work ethics, employee response, and job satisfaction: An exploration of Indonesian Islamic banking employees. Jurnal Minds: Manajemen Ide dan Inspirasi, 11(1), 59–72.

Athar, M. R., Shahzad, K., Ahmad, J., & Ijaz, M. S. (2016). Impact of Islamic work ethics on organizational commitment: Mediating role of job satisfaction. Journal of Islamic Business and Management, 6(1).

Auda, J. (2008). Maqasid al-Sharia and its objectives. In El-Mesawi, M. (Ed.), Regrounding Maqasid al-Shari’ah. Islamic Book Trust.

Ayugi, I. (2024). Ethical leadership and its impact on corporate governance. Kiu Publication Extension.

Brown, M. E., Treviño, L. K., & Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational Behavior and Human Decision Processes, 97(2), 117–134.

Business Perspectives. (2025). Islamic Work Ethics and Employee’s Task Performance: The Mediation Role of Affective Commitment. Problems and Perspectives in Management, 23(1).

Farooq, M. A., & Khan, A. M. (2020). Cultural adaptation of ethical leadership scales in Islamic banking contexts. Journal of Business Ethics, 167(3), 475–493.

Fawares, H. F., & Almheidat, T. (2022). The Islamic ethical leadership, ethical sensitivity, and employees’ ethical behavior: A narrative literature overview. Baltic Journal of Law & Politics, 15(1), 183–198.

Firdiansyah, F. A. (2021). Optimization of human resources management in Islamic banking following Islamic principles. JPS: Jurnal Perbankan Syariah, 2(2), 150–164.

Hassan, A., & Farouk, M. (2019). The role of organizational communication in ethical banking: A Malaysian case study. Asian Journal of Business Ethics, 8(2), 123–142.

Imam Prasojo, M., & Athallah, N. (2025). Leadership ethics in Islam: Trustworthiness, fairness, honesty, deliberation, and responsibility. ICESTRA: International Journal of Strategic Studies, 2(1), 28–41.

Islamic governance journals. (2023). Ethical leadership in external governance of Sharia business entities. Jurnal FEBI IAIN Kediri.

Javed, U., & Hussain, M. (2022). Religious congruence and ethical leadership outcomes in Islamic finance. International Journal of Islamic and Middle Eastern Finance and Management, 15(3), 456–473.

Junaidi, (2023). The role of ethical leadership to employees’ work engagement: a social learning theory perspective. International Journal of Social Economics, 51(7), 884–898.

Khan, S. U., Ahmad, N., & Malik, F. (2021). Sharia governance and ethical leadership: A comparative study in Islamic banking. Journal of Banking Regulation, 22(4), 353–372.

Ko, C., Ma, J., Bartnik, R., Haney, M. H., & Kang, M. (2017). Ethical leadership: An integrative review and future research agenda. Ethics & Behavior.

Liestyowati. (2024). Islamic ethics in business and finance: Implication for corporate governance and responsibility. Accounting Studies and Tax Journal (COUNT), 1(3), 195–213.

Lim, Y., & Ismail, I. (2020). Hierarchy, ethics, and job engagement in Malaysian Islamic banks. Journal of Islamic Accounting and Business Research, 11(1), 45–64.

Mergaliyev, A., Asutay, M., & Avdukić, A. (2019). Higher ethical objective (Maqasid al‑Shari’ah) augmented framework for Islamic banks: Assessing ethical performance and exploring its determinants. Journal of Business Ethics.

Mobarak, A. (2020). The impact of leadership style on the financial performance of Islamic banks. International Journal of Islamic Finance Studies.

Mursaleen, M., Khan, S. U., & Shaukat, M. Z. (2018). Islamic Work Ethics, Trust and Knowledge Sharing Relationship. Journal of Islamic Business and Culture, 3(1), 25–39.

Nazir, H., Shoukat, M. H., Elgammal, I., & Hussain, S. (2022). Impact of servant leadership on employee life satisfaction through Islamic work ethics in the Islamic banking industry. Asian Journal of Business Ethics, 11(2), 137–157.

Nazır, H., Shoukat, M. H., Elgammal, I., & Hussain, S. (2022). Impact of servant leadership on employee life satisfaction through Islamic work ethics in the Islamic banking industry. Asian Journal of Business Ethics, 11(2), 137–157.

Northouse, P. G. (2016). Leadership theory and practice. SAGE.

Pertiwi, B., & Narulitasari, D. (2024). The impact of zakat on the financial performance of Islamic commercial banks in Indonesia. International Conference on Islamic Economics Studies – ICIES 2024.

Qureshi, M. I., Zaman, K., & Ahmed, Z. (2022). Measurement challenges in ethical leadership and organizational outcomes: A critique. International Journal of Islamic and Middle Eastern Finance and Management, 15(2), 290–309.

Riani, R., & Rusydiana, A. S. (2022). Do zakat disclosures have an impact on Islamic banking performance? International Journal of Zakat, 7(1), 75–90.

Riyandi, W., & Masdupi, E. (2025). Islamic business ethics and employee satisfaction in Islamic banking: A systematic literature review. Transnational Universal Studies, 3(2), 73–78.

SAGE. (2022). The Role of Islamic Work Ethics and Knowledge Sharing in Enhancing Organizational Outcomes. SAGE Business Cases.

Saleem, A., & Waheed, A. (2021). Bridging the gap between ethical leadership and employee performance: The missing link in Islamic banking. Asian Journal of Management Studies, 28(4), 789–807.

Sobol, I., Dopierała, Ł., & Wysiński, P. (2023). Is the profitability of Islamic and conventional banks driven by the same factors? A study of banking in the Middle East. PLOS ONE, 18(8), e0289264.

Sumiyati, & Vebtasvili, V. (2021). Ethical Identity Index and Financial Performance of Islamic Banks in Asia. Li Falah: Jurnal Studi Ekonomi dan Bisnis Islam, 6(1), 1–14.

Syamsuddin, S. Z., & Al‑Amin, M. (2023). The role of ethical leadership to employees work engagement: A study in Indonesia Islamic Bank. International Journal of Social Economics and Public Policy.

Yusoff, N. M., & Al‑Rashid, H. F. (2023). Dual outcomes of ethical leadership in Islamic financial institutions: A qualitative study. International Journal of Islamic and Middle Eastern Finance and Management, 16(1), 65–84.

Zahrotul Janah, A., & Muharrami, R. S. (2025). Determinants of financial performance of Islamic banking in Indonesia: The role of zakat, CSR, and CEI. Jurnal Ekonomi, Manajemen, dan Perbankan, 11(1), 69–84.

Zaim, H., Demir, A., & Budur, T. (2021). Ethical leadership, effectiveness and team performance: An Islamic perspective. Middle East Journal of Management, 8(1), 42–66.

Zakaria, N., Razali, M. M., Jamian, N. F., Eshak, E. S., & Osman, I. (2024). A meta‑analysis of the impact of ethical leadership and Islamic work ethics on ethical work behavior. International Multidisciplinary Business Review, 17(1).

Zuhlke, D. G. (2019). The impact of ethical leadership on trust levels between employees. Capella University.