Abstract: The development of Islamic banking in Southeast Asia has intensified interest in how these institutions maintain performance while complying with Sharia principles. However, the specific contributions of research and development (R&D) activities and Sharia Supervisory Board (SSB) decisions remain underexplored, particularly across different regulatory contexts. Understanding these dynamics is essential for enhancing the competitiveness and sustainability of Islamic banks. This study examines the influence of R&D and SSB on the performance of Islamic banks in Indonesia and Malaysia. It aims to identify how these factors affect Islamic banking performance differently, reflecting variations in national policies. A mixed-method design is adopted, integrating quantitative and qualitative approaches. The quantitative analysis uses purposive sampling of Islamic banks in Indonesia and Malaysia, with panel data reported under International Financial Reporting Standards (IFRS) for 2016–2022. The Generalized Method of Moments (GMM) estimator is applied to assess the impact of R&D and SSB. Complementary qualitative insights are drawn from observation and an extensive literature review to contextualize the findings. The results show that R&D has no significant impact on bank performance in Indonesia but exerts a positive effect in Malaysia, underscoring the importance of supportive policy environments. The role of SSB remains vital for governance but varies by institutional context. These findings offer practical implications for policymakers, regulators, and bank managers, highlighting the need to design innovation policies tailored to national contexts while upholding Sharia compliance. The study contributes to the literature by providing a comparative perspective on how R&D and SSB jointly shape Islamic bank performance.
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