Equity Financing at Islamic Banks: Do Competition and Bank Fundamentals Matter?

Risfandy, Tastaftiyan; Harahap, Burhanudin; Hakim, Arif Rahman; Sutaryo, Sutaryo; Nugroho, Linggar Ikhsan; Trinugroho, Irwan

doi:10.1080/1540496x.2018.1553160

Cited by 25 publications

(21 citation statements)

References 41 publications

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“…Even though become the main difference of Islamic banks to their conventional rivals, equity financing is rarely explored possibly because of the unavailability or completeness data. Prior research has investigated equity financing and its relation with the institutional environment (Alam & Parinduri, 2017), Shariah Supervisory Board (Risfandy, 2018), Competition and bank fundamentals (Risfandy et al, 2018), and efficiency (Othman, Abdul-Majid, & Abdul-Rahman, 2017). Second, to the best of our knowledge, our work is the first that investigates the impact of equity financing on Islamic banks profitability.…”

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confidence: 96%

“…Because equity financing is very risky as highlighted earlier, Islamic banks should have strong reason to use this instrument. Indeed, Risfandy et al (2018) provide empirical evidence that Islamic banks use equity financing to face the pressure of banking market competition. Equity financing is believed could attract more entrepreneurs to join Islamic banks as a client.…”

Section: |mentioning

confidence: 99%

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Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Risfandy

2018

Jurnal Keuangan Dan Perbankan

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It was highlighted in the literature that Islamic banks' equity financing was very risky in practice. Theoretically, equity financing could boost Islamic banks' profitability because the riskier financial instrument was always associated with the greater return that could be created. Using a sample of nine Islamic banks in Indonesia from 2009m1 to 2014m12, interestingly we found that higher proportion of equity financing was significantly associated with lower Islamic banks' profitability. However, this negative relationship diminished in the case of large Islamic banks, implying that the negative effect of equity financing on Islamic banks' profitability was more prominent for small banks rather than for large banks. Our results were robust using various estimations. Although equity financing was a core of Islamic banks and could differ Islamic from conventional banks' activities but Islamic banks altogether with policymakers should evaluate this instrument for the sake of Islamic banks' profitability and its prospects in the future.

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confidence: 96%

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confidence: 99%

Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Risfandy

2018

Jurnal Keuangan Dan Perbankan

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“…PLS means Islamic banks and entrepreneurs sharing risks, as well as rewards related to entrepreneurial activities, which, in turn, will bring the economy to new heights. Besides, Risfandy et al (2020) also explained that profit and loss sharing (PLS) mechanisms are more attractive for entrepreneurs because it based on equity financing and not a debt arrangement as in conventional banks, which more beneficial for both parties. Similarly, Fianto et al (2018) and Naqvi et al (2018) stated that PLS contract is the equity financing which differentiates Islamic finance institution from the conventional interest-based system.…”

Section: Discussionmentioning

confidence: 99%

Examining the Correlation Between Islamic Banks Profitability and the Business Cycle in Indonesia

Sholikhin

Supriani

Amijaya

2021

IJIBE

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This study aims to examine the correlation between Islamic banks' profitability in Indonesia and the business cycle, which measured by composite leading Indicator (CLI).�This study used several annual data covering the period from 2004-2018. This study utilizes Islamic banks profitability represent by Return on Asset (ROA) data as the dependent variable, CLI data as the dependent variable, and six control variables including Gross Domestic Product, Inflation, Financial to Deposit Ratio, Capital Adequacy Ratio, Non-Performing Finance, and Operating Costs Operating Income. This study adopted multiple regression analysis by using EViews 9.0 software. This study reveals that CLI has a positive and significant impact on ROA, which indicated that the expansion of business cycle activities would increase Islamic banks' profitability. Thus, this study suggests that Islamic bank should engage with the companies that relied on their business activities in the rill sector to boost their profitability. The limitation of this study is this study adopted Indonesian Islamic banks in general. Therefore, this study does not capture the correlation amongst the variables in the specific Islamic banks and region, which might be different from this result due to the differences in banks' internal conditions, culture, and the business cycle in the various region.

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“…Current research has proven that Equity Financing has a positive and significant effect on Profit Expense Ratio in companies registered on Jakarta Islamic Index (JII). Equity Financing is the principle of participation in the context of fulfilling capital (Drover et al, 2017;Risfandy et al, 2020;Wang & Zhu, 2013). Equity Financing utilizes a fair system where profit/loss is shared, thus triggering fund users to improve their business performance because they are aware that the responsibility is shared and there is a control group where the company supervises the business performance of fund users so that the business is under control.…”

Section: Economica: Journal Of Economic and Economic Educationmentioning

confidence: 99%

Estimating of Debt Financing, Equity Financing Towards Profit Expense in Indonesia

Hadya¹

2021

Economica

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The weakening of the rupiah currency causes the increase of both company's debt in the form of dollars when converted into the local currency, and interest rates. This causes many companies to experience a decrease in performance because costs, especially interest, have increased which resulted in losses and even resulted in bankruptcy. The main purpose of this empirical research was to examine whether a relationship exists between funding sources, which are debt financing and equity financing, and profit expense. A panel data regression model was carried out in this research on companies registered on the Jakarta Islamic Index (JII) Indonesia from 2015 to 2019. As many as 110 observation samples were collected through purposive sampling. The results of the current research discovered that equity financing affects the capital cost or profit expense positively and statistically significant. Meanwhile, debt financing does not have a significant effect on profit expense. Specifically, such results indicate that debt financing does not affect profit expense. However, evidence was found that equity financing significantly affects profit expense, indicating that the equity financing system is more oriented towards working capital. Our research has provided empirical evidence that the higher the source of funding, namely equity financing, the higher the profit expense.

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Equity Financing at Islamic Banks: Do Competition and Bank Fundamentals Matter?

Cited by 25 publications

References 41 publications

Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Equity Financing and Islamic Banks’ Profitability: Evidence from the Biggest Muslim Country

Examining the Correlation Between Islamic Banks Profitability and the Business Cycle in Indonesia

Estimating of Debt Financing, Equity Financing Towards Profit Expense in Indonesia

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