Effect of Quality of Good Corporate Governance Disclosure, Leverage and Firm Size on Profitability of Isalmic Commercial Banks

Harisa, Enni; Adam, Mohamad; Meutia, İnten

doi:10.32479/ijefi.8157

Cited by 54 publications

(94 citation statements)

References 5 publications

(7 reference statements)

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“…The effect of the corporate governance on the IBs financial performance shows mixed results. For example, Harisa et al (2019) reported the impact of the corporate governance on the IBs profitability in Indonesia and Malaysia from 2011 to 2017. Using the panel data regression analysis, they showed that the governance does not affect the profitability measured by ROA.…”

Section: Shariah Governance and Financial Performancementioning

confidence: 99%

Disclosure, Shariah governance and financial performance in Islamic banks

Abdallah

Bahloul

2021

AJEB

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PurposeThis study aims at investigating the impact of the disclosure and the Shariah governance on the financial performance in MENASA (Middle East, North Africa and Southeast Asia) Islamic banks.Design/methodology/approachWe use the Generalized Least Squares (GLS) regression models to check the interdependence relationship between the disclosure, the Shariah governance and the financial performance of 47 Islamic banks (IBs) from ten countries operating in MENASA region. The sample period is from 2012 to 2019. In these regressions models, Return on Assets (ROA) and Return on Equity (ROE) are the dependent variables. The disclosure and the Shariah governance indicators are the independent factors. To measure the Shariah governance, we use the three sub-indices, which are the Board of Directors (BOD), the Audit Committee (AC) and the Shariah Supervisory Board (SSB). Size, Leverage and Age of the bank are used as control variables. We also used The Generalized Method of Moments (GMM) and the three-stage least squares (3SLS) estimations for robustness check.FindingsResult shows a negative relationship between the disclosure and the two performance measures in IBs. Furthermore, as far as the governance indicators are concerned, we found that the BOD and AC, as well as the BOD and SSB, have a positive and significant impact on the ROA and ROE, respectively. This reveals that good governance had a significant association with higher performance in MENASA IBs.Originality/valueThe paper considers both IBs that adopt mandatory as well as voluntary AAOIFI standards and the GLS method to investigate the impact of the AAOIFI disclosure and the Shariah governance on ROA and ROE. Also, it uses the GMM and the 3SLS estimations for robustness check. It is relevant for researchers, policymakers and stakeholders concerned with IBs' performance.

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Section: Shariah Governance and Financial Performancementioning

confidence: 99%

Disclosure, Shariah governance and financial performance in Islamic banks

Abdallah

Bahloul

2021

AJEB

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“…Profitability is measured using Return on Assets (ROA) is often a major concern because its ability to project the company's past earnings to be used as an evaluation in the future [31]. Banks' ability to create income from total assets is launched with Return on Assets (ROA) [32]. If this is more significant, a company's possibility in a problematic condition is less because the resulting profit increases.…”

Section: Profitabilitymentioning

confidence: 99%

Good Corporate Governance, Capital Adequacy, Financing Risk, Profitability and Islamic Social Reporting (ISR) of Sharia Commercial Banks in Indonesia

Wijaya

Sulistyo

Roziq

2021

AJEBA

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Aims: To empirically evaluate Sharia commercial banks in Indonesia for good corporate governance, capital adequacy, financing risk, profitability, and Islamic Social Reporting (ISR). Study Design: Explanatory research with a quantitative approach and using secondary data. Place and Duration of Study: Sharia commercial banks registered with the Financial Services Authority in the period 2015-2019. Methodology: The sample selection used a purposive sampling technique and resulted in 7 Sharia commercial banks. Data analyzed using path analysis with SmartPLS 3.0. The analysis only uses the inner model evaluation because each variable in this study only uses one proxy or one indicator. Results: Good corporate governance and capital adequacy affects financing risk, good corporate governance, capital adequacy, and financing risk affects profitability, financing risk affects Islamic Social Reporting (ISR), while good corporate governance, capital adequacy, and profitability do not affect Islamic Social Reporting (ISR). Conclusions: Management should be able to create good corporate governance, manage capital adequacy to mitigate financing risk so that it can generate optimal profits for conducting sharia-based social activities and express it using the Islamic Social Reporting (ISR) as business transparency for stakeholders, thus increasing stakeholder confidence in the existence of Islamic commercial banks.

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“…with profitability (Chen, Firth, and Rui, 2006). Meanwhile, there is no relationship between debt and profitability (Amanda, 2019;Harisa et al, 2019;Kebewar and Shah, 2012).…”

Section: Debt Financing and Profitabilitymentioning

confidence: 99%

“…Conversely, there is a positive association between debt and profitability (Harelimana, 2017;Holz, 2002;Kartikasari and Merianti, 2016). Meanwhile, debt is not associated with profitability (Amanda, 2019;Hadiah, 2016;Harisa, Adam, and Meutia, 2019;Kebewar and Shah, 2012).…”

Section: Introductionmentioning

confidence: 96%

Is The Higher Debt Level Profitable for State-Owned Enterprises?

Sutopo¹,

Arum²,

Siddi³

2021

IJEBA

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Purpose: The need for more significant debt financing to achieve higher profitability of State-Owned Enterprises (SOEs) is an issue that has recently attracted public attention in Indonesia. This study examines how SOE debt financing is associated with profitability when the debt level is relatively low and relatively high. Design/Methodology/Approach: The sample includes 514 SOE observations in the 2014-2018 period. Regression models are used to test the research hypotheses. Findings: The regression results show a positive association between debt financing and profitability when debt levels are low. On the other hand, the results show that the relationship is negative when debt levels are high. These results are consistent after controlling for the size, type, and industrial sector of the SOEs and observation year. Practical Implications: These findings suggest the need for controlling SOE debt financing to achieve SOE objectives in generating profits in Indonesia. Originality/value: By splitting the sample into low and high debt levels, this study presents findings that can show when debt financing can increase profitability and reduce SOEs' profitability.

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Effect of Quality of Good Corporate Governance Disclosure, Leverage and Firm Size on Profitability of Isalmic Commercial Banks

Cited by 54 publications

References 5 publications

Disclosure, Shariah governance and financial performance in Islamic banks

Disclosure, Shariah governance and financial performance in Islamic banks

Good Corporate Governance, Capital Adequacy, Financing Risk, Profitability and Islamic Social Reporting (ISR) of Sharia Commercial Banks in Indonesia

Is The Higher Debt Level Profitable for State-Owned Enterprises?

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