FINANCIAL FACTORS AND ISLAMIC BANKING PROFITABILITY IN OIC COUNTRIES
Abstract
Abstract: Profitability is important information for investors, managers and bank customers, because it describes the bank's stability and financial performance. Increased profitability contributes to economic growth, as rising profits improve a company's cash flow position and provide greater flexibility. This paper aims to dig deeper into the impact of financial factors on Islamic banking profitability. Profitability is measured using several ratios, namely Return on Assets (ROA), and Return on Equity (ROE), while the financial factors used in this research include Investment Account Holder (IAH), Non-Performing Financing (NPF), Asset Management, and Capital Structure. Next, the sample in this research is sharia banking from several OIC member countries such as Indonesia, Kuwait, Saudi Arabia, United Arab Emirates, and Qatar. Using panel data from 24 sharia banks form 2013-2021, this research produced 231 observational data. Furthermore, this research used the Hausman test to differentiate between fixed effects and random effects. The results of this research show that IAH, NPF, ATR, and DER simultaneously influence the profitability of Islamic banks. However, for the partial test, in models 1 and 2 (ROA & ROE), NPF has a negative effect on profitability, while ATR (ROA & ROE) has a positive effect on profitability. Furthermore, the IAH variable has no effect on profitability (ROA), and has a positive effect on profitability (ROE), while DER has no effect on profitability either as a proxy for ROA or ROE in Islamic banks in OIC member countries.
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