2017
DOI: 10.1108/imefm-12-2015-0161
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Determinants of Islamic banks’ profitability: international evidence

Abstract: Purpose The purpose of this paper was to investigate the determinants of Islamic banks’ profitability using longitudinal data from 1992 to 2008 of almost all Islamic banks in the world. Design/methodology/approach An unbalanced panel data fixed-effects regression model was used. Findings The results of the study indicate that capital ratio, other operating income, GDP per capita, bank size, concentration and oil prices affected Islamic banks positively. Insurance schemes, foreign ownership and real GDP gro… Show more

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Cited by 50 publications
(61 citation statements)
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References 40 publications
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“…If GDP rises, it will be followed by an increase in income so that the ability to save also increases. In line with the study, our study found that GDP has significant effect on the profitability of Sharia banks [6,9,33,52,57]. That the average income of the Indonesian population has not been able to set aside their income for saving, whereas some Indonesian workers are outsourced employees with low bargaining power both in legal and income aspects, and this affects the decrease Sharia Banks Profitability.…”
Section: Discussionsupporting
confidence: 79%
See 1 more Smart Citation
“…If GDP rises, it will be followed by an increase in income so that the ability to save also increases. In line with the study, our study found that GDP has significant effect on the profitability of Sharia banks [6,9,33,52,57]. That the average income of the Indonesian population has not been able to set aside their income for saving, whereas some Indonesian workers are outsourced employees with low bargaining power both in legal and income aspects, and this affects the decrease Sharia Banks Profitability.…”
Section: Discussionsupporting
confidence: 79%
“…The size of the inflation rate will affect the company's financial performance, especially in terms of profitability. The results of the study found that significant and positive inflation affects the profitability of Sharia banks in Indonesia [3,8,[30][31][32]57]. These findings illustrate that the Indonesian Muslim community despite inflation still has significant purchasing power.…”
Section: Discussionmentioning
confidence: 74%
“…The regression coefficient X1 of 0.001787 implies that for every increase in X1 of one unit it will increase the ROA of 0.001787 and vice versa. The results of this study support Alharbi [16] which states that banks with large capital are safer than banks with low capital ratios because they have access to cheaper and less risky sources of funds, which leads to increased profitability. b.…”
Section: Hypothesis Test (T-test)supporting
confidence: 76%
“…This indicates that high oil prices increase Islamic banks profitability leading to higher rate of return on deposits. This positive effect of high oil prices on Islamic banks performance documented by Chowdhury & Rasid (2016) and Alharbi (2017) study.…”
Section: Discussion Of Resultsmentioning
confidence: 59%
“…The studies conducted by Sufian (2012), Al-Awawdeh & Al-Sakini (2017) and Alharbi (2017) linked banks' profitability to OBS activity. The result of foreign ownership is positive and significant at level of 10 percent.…”
Section: Discussion Of Resultsmentioning
confidence: 99%