University of Tehran Iranian Economic Review 1026-6542 Articles in Press 2024 10 02 A Relationship between Corporate Governance, Financial Performance and Financial Stability: The Case of Islamic Banks of GCC Countries 98839 10.22059/ier.2024.376808.1008014 EN Zaineb Bououn Institute of Higher Commercial Studies of Sousse, Sousse 4000, Tunisia 0009-0000-1548-7796 Wissem Benali ESCT, University of Manouba, LARIMRAF, Tunisia. 0000-0002-6380-9400 Jamel Eddine Mkadmi Higher institute of business administration of Gafsa, Gafsa, Tunisia 0000-0001-7888-0747 Journal Article 2024 05 20 This study investigates the stability issues of Islamic banks (IBs) in Gulf Cooperation Council (GCC) countries, with a particular focus on the relationship between IB stability and corporate governance mechanisms. Utilizing the Z-score methodology and examining the impact of corporate governance variables on IB stability, the research aims to assess whether stability issues pose threats to the entire financial institutions in the GCC region. Unlike previous cross-country studies, this research concentrates on country-level data from Malaysia's banking industry, providing complementary insights into the emerging literature on Islamic banking stability. Employing a sample of 100 Islamic banks using the generalized moment method, the study examines variables such as Shari'ah board size, board size, and independent directors alongside the Z-score as the dependent variable, aiming to provide a comprehensive understanding of the governance mechanisms influencing IB stability. The analysis underscores the complexity of the relationship between financial performance and stability, highlighting both positive and negative impacts. While high financial performance can enhance stakeholder confidence and governance effectiveness, it may also lead to behaviors undermining long-term stability, such as excessive risk-taking and moral hazard. The study also emphasizes the significance of financial stability measures, such as the Z-score, in assessing the health of financial institutions. In conclusion, the research contributes to the understanding of stability issues in Islamic banking and underscores the importance of effective governance mechanisms in ensuring the resilience of financial institutions in the GCC region.