.jpg)
.jpg)
Factors Affecting Islamic Bank Financial Performance
Abstract
Purpose – This study aims to investigate the factors affecting financial performance in Islamic banks.
Methodology - The quantitative approach is applied in this study with panel data analysis as analysis tool. This study measures the performance of Islamic Banks (IBs) in Türkiye and Indonesia. In total, there are 5 and 11 Islamic banks in Türkiye and Indonesia respectively used in this study, resulting 109 samples to analyze.
Findings - The results show that bank size, capital ratio, operating expense ratio and inflation are found to be significant on Return on Avergae Assets (ROAA) positively. However, bank age and loan ratio do not have significant effect on ROAA. It is important to evaluate these factors to improve financial performance of Islamic bank in both countries as big Muslim population.
Keywords
Full Text:
PDFReferences
Ajili, H. and Bouri, A. (2018), “Corporate governance quality of Islamic banks: measurement and effect on financial performance”, International Journal of Islamic and Middle Eastern Finance and Management, Vol. 11 No. 3, pp. 470-487. doi:https://doi.org/10.1108/IMEFM-05-2017-0131
Al-Harbi, A. (2019), “The determinants of conventional banks profitability in developing and underdeveloped OIC countries, Journal of Economics, Finance and Administrative Science, Vol. 24 No. 47, pp. 4-28. doi:10.1108/JEFAS-05-2018-0043
Al-Kayed, L. T., Zain, S. R. S. M. and Duasa, J. (2014), “The relationship between capital structure and performance of Islamic banks”, Journal of Islamic Accounting and Business Research, Vol. 5 No. 2, pp. 158-181. doi:10.1108/JIABR-04-2012-0024
Al-Malkawi, H.-A. N. and Pillai, R. (2018), “Analyzing financial performance by integrating conventional governance mechanisms into the GCC Islamic banking framework”, Managerial Finance, Vol. 44 No. 5, pp. 604-623. doi:https://doi.org/10.1108/MF-05-2017-0200
Al-Naseer Mohammed, S. A. S. and Joriah Muhammed, D. (2017). “Financial crisis, legal origin, economic status and multi-bank performance indicators: evidence from Islamic banks in developing countries”, Journal of Applied Accounting Research, Vol. 18 No. 2, pp. 208-222. doi:https://doi.org/10.1108/JAAR-07-2014-0065
Ali, M., & Khattak, M. A. (2020), “Income structure and performance: An empirical analysis of Islamic and conventional banks in Indonesia”, Bulletin of Monetary Economics and Banking, (Special Issue), pp. 87-108. doi:https://doi.org/10.21098/bemp.v23i0.1193
Alsartawi, A. M. (2019), “Performance of Islamic banks: Do the frequency of shari’ah supervisory board meetings and independence matter ?”, ISRA International Journal of Islamic Finance, Vol. 11 No. 2, pp. 303-321. doi:10.1108/IJIF-05-2018-0054
Al-Tamimi, H. A. H. (2010), “Factors influencing performance of the UAE Islamic and conventional national banks”, Global Journal of Business Research, Vol. 4 No. 2, pp. 1-9.
Andreb, H.-J., Golsch, K. and Schmidt, A. W. (2013), Applied Panel Data Analysis for Economic and Social Surveys, Springer, Heidelberg New York and Dordrecht London.
Athanasoglou, P. P., Brissimis, S. N. and Delis, M. D. (2008), “Bank-spesific, industry-spesific and macroeconomic determinants of bank profitability”, Journal of International Financial Markets, Institutions and Money, Vol. 18, pp. 121-136. doi:10.1016/j.intfin.2006.07.001
Ayub, M. (2007), Understanding Islamic Finance, John Wiley and Sons, Ltd., Chichester.
Birken, E. G. (2021), “Understanding return on assets (ROA), available at: https://www.forbes.com/advisor/investing/roa-return-on-assets/
Bouheni, F. B., Ammi, C. and Levy, A. (2016), Banking Governance, Performance and Risk-taking, ISTE Ltd & John Wiley & Sons, Inc., London & Hoboken.
Bryman, A. (2012), Social Research Methods, Oxford University Press, New York.
Bukair, A. A. and Rahman, A. A. (2015), “Bank performance and board directors attributes by Islamic banks”, International Journal of Islamic and Middle Eastern Finance and Management, Vo. 8 No. 3, pp. 291-309. doi:10.1108/IMEFM-10-2013-0111
DinarStandard, (2022), “State of the global Islamic economy report: unlocking opportunity”, available at: https://www.salaamgateway.com/specialcoverage/SGIE22 (accessed 1 June 2022).
Furqani, H. and Mulyany, R. (2009), “Islamic banking and economic growth: empirical evidence from Malaysia”, Journal of Economic Cooperation and Development, Vol. 30 No. 2, pp. 59-74.
Garson, G. D. (2016), Partial least squares: regression and structural equation models, Statistical Publishing Associates, USA.
Greene, W. H. (2003), Econometric Analysis, Pearson Education, New Jersey.
Gujarati. (2004), Basic Econometrics, The McGraw-Hill Companies, New York.
Haron, S. (1996), “Competition and other external determinants of the profitability of Islamic banks. Islamic Economic Studies,Vol. 4 No. 1, pp. 49-64.
Hidayat, S. E. and Abduh, M. (2012), “Does financial crisis give impacts on bahrain Islamic banking performance ? A panel regression analysis. International Journal of Economics and Finance, Vol. 4 No. 7, pp. 79-87. doi:10.5539/ijef.v4n7p79
Hsiao, C. (2003), Analysis of Data Panel, Cambridge University Press, New York.
IFSB, (2021), Islamic Financial Services Industry Stability Report 2021, Islamic Financial Services Board (IFSB), Kuala Lumpur.
Ismal, R. (2013), Islamic Banking in Indonesia: New Perspectives on Monetary and Financial Issues, John Wiley & Sons Singapore Pte. Ltd, Singapore.
Izhar, H. and Asutay, M. (2007), “Estimating the profitability of Islamic banking: evidence from bank muamalat Indonesia”, Review of Islamic Economics, Vol. 11 No. 2, pp. 17-29.
Kosmidou, K. (2008), “The determinants of banks profit in greece during the period of EU financial integration”, Managerial Finance, Vol. 34 No. 3, pp. 146-159. doi:10.1108/03074350810848036
Khanifah, K., Hardiningsih, P., Darmaryantiko, A., Iryantik, I. and Udin, U. (2020), “The effect of corporate governance disclosure on banking performance: empirical evidence from Iran, Saudi Arabia and Malaysia”, Journal of Asian Finance, Economics and Business, Vol. 7 No. 3, pp. 41-51. doi:10.13106/jafeb.2020.vol7.no3.41
Majumdar, S. K. (1997), “The impact of size and age on firm-level performance: Some evidence from India”, Review of Industrial Organization, Vol. 12, pp. 231-241.
Moullin, M. (2002), Delivering Excellence in Health and Social Care: Quality Excellence and Performance Measurement, Open University Press.
Naceur, S. B. (2003), “The determinants of the Tunisian banking industry profitability: Panel evidence”, available at: http://www.mafhoum.com/press6/174E11.pdf
OJK, (2021), ”Snapshot perbankan syariah Indonesia”, available at https://www.ojk.go.id/id/kanal/syariah/berita-dan-kegiatan/publikasi/Pages/Snapshot-Perbankan-Syariah-September-2021.aspx (accessed 2 June 2022).
Platonova, E., Asutay, M., Dixon, R. and Mohammad, S. (2018). “The impact of corporate social responsibility disclosure on financial performance: evidence from the GCC Islamic banking sector”. J Bus Ethics (150), pp. 451-471. doi:https://doi.org/10.1007/s10551-016-3229-0
Refinitive, (2021), “Islamic finance development report 2021: Advancing economies”, available at: https://www.refinitiv.com/en/resources/special-report/islamic-finance-development-report (accessed 1 June 2022).
Salih, T. (2019), “Terseret kasus snp finance, ini evaluasi bank panin dubai”, available at: https://www.cnbcindonesia.com/market/20190418151812-17-67589/terseret-kasus-snp-finance-ini-evaluasi-bank-panin-dubai
Saragih, H. P. (2019), “Terungkap! ini penyebab masalah kronis di bank muamalat”, available at: https://www.cnbcindonesia.com/market/20191115093424-17-115443/terungkap-ini-penyebab-masalah-kronis-di-bank-muamalat
Simpson, W. G. and Kohers, T. (2002), “The link between corporate social and finance performance: Evidence from the banking industry”, Journal of Business Ethics, Vol. 35 No. 2, pp. 97-109.
TCMB. (2021), “Enflasyon verileri”, available at: https://www.tcmb.gov.tr/wps/wcm/connect/tr/tcmb+tr/main+menu/istatistikler/enflasyon+verileri
TKBB, (2021), Katılım Bankaları 2021, TKBB, Istanbul.
Vong, A. P. I., & Chan, H. S. (n.d.), “Determinants of bank profitability in Macao”, available at: https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.533.7516&rep=rep1&type=pdf
Wasiuzzaman, S. and Gunasegavan, U. N. (2013), “Comparative study of the performance of Islamic and conventional banks: The case of Malaysia”, Humanomics, Vol. 29 No. 1, pp. 43-60. doi:10.1108/08288661311299312
World Bank. (2021), “Inflation, consumer price (Annual %)-Turkey”, available at: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=TR
Zarrouk, H., Jedidia, K. B. and Moualhi, M. (2016), “Is Islamic banks profitability driven by same forces as conventional banks”, International Journal of Islamic and Middle Eastern Finance and Management, Vol. 9 No. 1, pp. 46-66. doi:10.1108/IMEFM-12-2014-0120
Zouari, S. B. S. and Taktak, N. B. (2014), “ Ownership structure and financial performance in Islamic banks: does bank ownership matter ?”, International Journal of Islamic and Middle Eastern Finance and Management, Vol. 7 No. 2, pp. 146-160. doi:10.1108/IMEFM-01-2013-0002
DOI: https://doi.org/10.17509/rief.v7i2.75396
Refbacks
- There are currently no refbacks.
Copyright (c) 2024 Mumuh Muhammad
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
This journal provides immediate open access to its content on the principle that makes research freely available to the public and supports a greater global exchange of knowledge.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 Internasional (CC BY-SA 4.0).