The Journal of Social Sciences Research ISSN(e): 2411-9458, ISSN(p): 2413-6670 Vol. 5, Issue. 2, pp: 264-274, 2019 URL: https://arpgweb.com/journal/journal/7 DOI: https://doi.org/10.32861/jssr.52.264.274 Academic Research Publishing Group *Corresponding Author 264 Original Research Open Access The Moderating Effect of Shariah Governance on Financial and Maqasid Shariah Performance: Evidence from Islamic Banks in Indonesia Lia Dahlia Iryani * Doctoral Student of Accounting Program Padjadjaran University and Lecturer at the Faculty of Economic, Pakuan University, Jalan Pakuan PO Box 452 Bogor 16143, West Java, Indonesia Winwin Yadiati Lecturer and researcher at Departement of Accounting, Padjadjaran University, Jalan Dipati Ukur 35, Bandung 40132, West Java, Indonesia Eddy Mulyadi Supardi Lecturer at the Faculty of Economic, Pakuan University, Jalan Pakuan PO Box 452 Bogor 16143, West Java Indonesia Iwan Triyuwono Lecturer and researcher at the Faculty of Economic and Business, University of Brawijaya, Jalan Mayjend Haryono 165, Malang 65145, East Java Indonesia Abstract The aim of this research is to assess the effect of financial performance to Maqasid Shariah performance with shariah governance as a moderating variable. Financial performance can be measured based on three criteria: firm size (FS), return on asset (ROA) and asset structure, while Maqasid Shariah performance is measured by zakat, infaq, shadaqoh and awqaf (ZISWAF) and qordhul hasan (QH). Shariah governance (SG) is measured by the proportion of independent board of commissioners’ members, board size, audit committee, and shariah supervisory board. The data in this study are the secondary data from Islamic Banking Financial Report (IBFR) of 2012-2016. This research employed a quantitative approach with panel data regression using E-views 9.0 software. The method for the data analysis used factor analysis. The results show that the effects of FS and ROA on Maqasid Shariah performance are significant, and the implementation of shariah governance is generally proven to play a significant role in moderating the effect of FS and ROA on Maqasid Shariah performance. The better the implementation of SG, the stronger the predictability of Maqasid Shariah, and shariah governance has a positive effect on Maqasid Shariah. Keywords: Proportion of independent board of commissioners; Board size, audit committee; Shariah Supervisory Board (SSB); Financial performance; ZISW; Qardhul hasan. CC BY: Creative Commons Attribution License 4.0 1. Introduction In the Islamic Financial Service Industry Stability Report 2016, it is stated that Indonesian Islamic banking is currently one of the contributors to the development of global Islamic banking, which was estimated to have total assets of $ 1.9 trillion at the end of 2016, contributing 2.5% of total Islamic financial assets (IFSB, 2016). Indonesia has gained international recognition as follows: (1) together with the UAE, Saudi Arabia, Malaysia and Bahrain, it is now considered to be in a position to offer lessons to other countries in the world for the development of Islamic finance and (2) together with Qatar, UAE, Saudi Arabia, Malaysia and Turkey (QISMUT), Indonesia is considered to be a future Shariah financial driving force (Ernst and Young, 2016). Positive growth marked the development of Shariah banking in 2016, after a slowing of growth in the three previous years. Islamic banking assets in 2016 were recorded to have increased by Rp 412,101 billion, or a growth of 20.28%. Shariah banking contributed the most to the increase in Islamic banking assets, with Rp 356,504 billion (The Financial Services Authority, 2016b;2016a). Islamic banks carry out their business activities based on Shariah principles, which are in accordance with the fatwa of the National Sharia Board (DSN); specifically, must be free from riba (interest), maysir (games of chance or speculation) and gharar (excessive uncertainty) in all their operations. Therefore, the objectives of Islamic banking must also be in accordance with the objectives of Shariah, or Islamic Law (Bank Indonesia, 2013). Measurement of the performance of Islamic banks in accordance with the objectives of Shariah, or Islamic Shariah, is yet to be developed, so any performance measurement of such banks still uses measures which highly focus on financial aspects. Little attention has been paid to non-financial aspects (Ascarya and Sukmana, 2017; Triyuwono, 2011). More specifically, research integrating the value of Islamic principles with measurement of the performance of Islamic banks began to emerge in 2008, in which social aspects should be of concern to Islamic banks (Akram and Furqani, 2013; Chapra and Khan, 2008; Dusuki and Bouheraoua, 2011; Mohammed and Razak, 2008). Islamic banking carries out social functions, the most visible of which are realized through the activities of collecting and