The Impact of Banks Characteristics Variables on Indonesian Islamic Banks Profitability

Cupian Cupian, Riki Relaksana

2017

Abstract

Recently, Islamic Banks in Indonesia are going to become more challenging. Due to this situation, it is important for these banks to strengthen their business performance in order to face with the strong competition among banks. The performance of these banks can be measured through profitability which is influenced by various factors. The internal determinants that resulted from bank management decision and policy may definitely affect the bank’s operating activities as well as its profitability. Therefore, this research is conducted to study the factors which determine profitability of Islamic banking institutions where special focus is given on bank-specific characteristics. The Least Square Dummy Variable (LSDV) panel data analysis. Five of eight independent variables, are significant in determining the profitability of Indonesian Islamic banks. The third party funds affect negatively profitability indicator. Overhead cost also influence banks’ profitability negatively that demonstrates this variable contribute in reducing profitability. Meanwhile, total asset has positive relationship with profitability indicator indicates that banks of large size enjoy scale economy and achieve higher revenue. The interest-free earning assets affects profitability positively indicates that Islamic banks are keen to rely on this factor to enhance their profitability. Moreover, the positive impact of increased income from services activities on profitability reveals that Islamic banks so far has an important role in as sources of revenue. Interest free earning assets is the most important of bank characteristics that determines Indonesian Islamic banking’s performance.

Paper Citation

in Harvard Style

Cupian C. and Relaksana R. (2017). The Impact of Banks Characteristics Variables on Indonesian Islamic Banks Profitability.In 1st International Conference on Islamic Economics, Business, and Philanthropy - Volume 1: ICIEBP, ISBN 978-989-758-315-5, pages 267-275. DOI: 10.5220/0007080602670275

in Bibtex Style

@conference{iciebp17,
author={Cupian Cupian and Riki Relaksana},
title={The Impact of Banks Characteristics Variables on Indonesian Islamic Banks Profitability},
booktitle={1st International Conference on Islamic Economics, Business, and Philanthropy - Volume 1: ICIEBP,},
year={2017},
pages={267-275},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0007080602670275},
isbn={978-989-758-315-5},
}

in EndNote Style

TY - CONF

JO - 1st International Conference on Islamic Economics, Business, and Philanthropy - Volume 1: ICIEBP,
TI - The Impact of Banks Characteristics Variables on Indonesian Islamic Banks Profitability
SN - 978-989-758-315-5
AU - Cupian C.
AU - Relaksana R.
PY - 2017
SP - 267
EP - 275
DO - 10.5220/0007080602670275