The Impact of Liquidity, Credit, Financial Leverage Risks on Financial Performance of Islamic Banks: The Case of Sudanese Banking Sector

Mennawi, Ahmed Nourrein Ahmed

doi:10.33094/8.2017.2020.82.73.83

Cited by 1 publication

(5 citation statements)

References 16 publications

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“…This certainly supports the trade-off theory which showed that financial leverage negatively affects financial stability (Harjito, 2011). This also supports previouse research that showed high leverage ratios contribute to poor banking stability (Mennawi, 2020). The results of the study show that Islamic banks must overcome the capital policy of debt for the continuity of their operations.…”

Section: Financial Leverage Against Bank Stabilitysupporting

confidence: 88%

“…Financial leverage is the amount of debt capital in the company's operations. Companies that use a debt ratio greater than their capital are at risk of experiencing a decrease in financial stability (Mennawi, 2020). In line with the trade-off theory, it is concluded that a high level of leverage risks reducing a bank's financial stability and even raises the risk of financial distress Heniwati & Essen (2020) and Malik (2019) found that banks in Pakistan use leverage on a high scale, actually reducing the risk of declining bank financial stability since banks have sufficient capital to manage operations.…”

Section: Introductionmentioning

confidence: 79%

“…If the wealth in the company is more funded by debt, then the company must also be able to generate more profit than the amount of debt so that the company is still able to pay its debt and interest, but also still able to make a profit (Dewi et al, 2019). Financial leverage reveals the relationship between bank debt and equity funds (Mennawi &;Ahmed, 2020). The existence of debt funds in the bank's financial position is a source of financing.…”

Section: Financial Leveragementioning

confidence: 99%

“…The easiest way to calculate a bank's financial leverage is to divide total debits by total equity. For Islamic banks, the equation is the same as in conventional banks because investment account holders generally take on debt characteristics (Mennawi, 2020).…”

Section: Financial Leveragementioning

confidence: 99%

“…High levels of leverage in banks in the country adversely affect the stability of Islamic banks and conventional banks and can cause financial distress (Miah & Uddin, 2017). A high leverage ratio has a negative impact on banking progress and stability (Mennawi, 2020) H2: Financial leverage negatively affects banking financial stability…”

Section: Financial Leveragementioning

confidence: 99%

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Product Market Competition, Financial Leverage, Risk of Financing on Financial Stability: Studies on Islamic Banks in Indonesia

Duwi Ira Setianti,

Slamet Haryono

2023

JESTT

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This study aims to explain and analyze the effect of product market competition, financial leverage, and risk of financing on the stability of Islamic banks in Indonesia in 2018-2022. The sampling technique used is Islamic banks listed on the Indonesia Stock Exchange. Source of data obtained from the annual report of each bank. The analytical method used is panel regression analysis with Eviews 10 software with the Common Effect Model (CEM) model as the best model. The variables used consist of product market competition (PCM), financial leverage (DER proxy), and financing risk (NPF proxy) on banking stability (proximate Natural Logarithm Z-Score). The results of this study found that product market competition did not affect bank stability. Meanwhile, financial leverage and financing risk have a negative effect on the stability of Islamic banks in Indonesia. From the results of this study, it is hoped that competition for Islamic banks in Indonesia can always run normally as it is today. In addition, the financial leverage and financing risks of Islamic banks have a negative impact on banking stability. Therefore, this research can be used as an early warning and reference for Islamic banks to make funding decisions through debt capital and excessive financing. keywords: Banking stability, product market competition, financial leverage, financing risk ABSTRAK Penelitian ini bertujuan untuk menjelaskan dan menganalisis pengaruh persaingan pasar produk, financial leverage, dan risk of financing terhadap stabilitas bank syariah di Indonesia pada 2018-2022. Teknik pengambilan sampel yang digunakan bank syariah yang terdaftar di Bursa Efek Indonesia. Sumber data diperoleh dari laporan tahunan masing masing bank. Metode analisis yang digunakan adalah analisis regresi panel dengan software Eviews 10 dengan model Common Effect Model (CEM) sebagai model terbaik .Variabel yang digunakan terdiri dari persaingan pasar produk (PCM), financial leverage (proksi DER) dan resiko pembiayaan (proksi NPF) terhadap stabilitas perbankan (doproksikan Natural Logarithm Z-Score. Hasil dari penelitian ini menemukan bahwa persaingan pasar produk tidak berpengaruh terhadap stabilitas bank. Sementara financial leverage dan resiko pembiayaan berpengaruh negative terhadap stabilitas bank syariah di Indonesia. Dari hasil penelitian ini, diharapkan persaingan bank syariah di Indonesia dapat selalu berjalan berjalan normal seperti saat ini. Selain itu, financial leverage dan resiko pembiayaan bank syariah berdampak buruk pada stabilitas perbankan. 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Section: Financial Leverage Against Bank Stabilitysupporting

confidence: 88%