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Abstract
Introduction
Previous literature discussed financing's impact on performance without separating the financing model. Additionally, previous research has used financing in the form of Loans to Total Assets (LTA); a proxy used to assess bank liquidity.
Objectives
This study aims to analyze the influence of financing models on Islamic Banks’ performance in Indonesia and Malaysia.
Method
The study used Indonesia and Malaysia banks for its pioneering efforts in establishing Islamic banking in Southeast Asia. The study collects data from five Indonesian and four Malaysian Islamic banks, with an observation period of 2011–2020. The data analysis used in this study was the Generalized Method of Moment (GMM).
Results
In Indonesia, debt financing has a positive and significant impact on Return on Assets (ROA), while equity financing has a negative and significant impact on ROA; debt financing significantly affects Return on Equity (ROE), while equity financing does not have a significant impact on ROE. In Malaysia, equity financing has a positive and significant impact on ROA, while debt financing does not significantly affect ROA; debt financing has a positive and significant impact on ROE, while equity financing has a negative and significant influence on ROE.
Implications
The results highlight the importance of considering the specific characteristics of each country's Islamic banking industry when formulating financing strategies.
Originality/Novelty
This study highlights unique aspect of financing that contribute to Islamic banks profitability in Indonesia and Malaysia.
Keywords
Article Details
Copyright (c) 2023 Multazam Mansyur Addury
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Belkhaoui, S., Alsagr, N., & Van Hemmen, S. F. (2020). Financing modes, risk, efficiency and profitability in Islamic banks: Modeling for the GCC countries. Cogent Economics & Finance, 8(1), 1750258. https://doi.org/10.1080/23322039.2020.1750258
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Gassen, J. (2014). Causal inference in empirical archival financial accounting research. Accounting, Organizations and Society, 39(7), 535–544. https://doi.org/10.1016/j.aos.2013.10.004
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Gusmawanti, A., Supaijo, S., Iqbal, M., & Fasa, M. I. (2020). The nexus between FDR, NPF, BOPO toward profitability of Indonesian Islamic bank. Al-Amwal : Jurnal Ekonomi Dan Perbankan Syari’ah, 12(2), 167–180. https://doi.org/10.24235/amwal.v12i2.7155
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Harianto, S. (2017). Rasio keuangan dan pengaruhnya terhadap profitabilitas pada bank pembiayaan rakyat syariah [Financial ratios and their influence on profitability in Islamic rural banks]. Esensi, 7(1), 41–48. https://doi.org/10.15408/ess.v7i1.4076
Hasnaoui, H., & Fatnassi, I. (2019). The impact of bank capital on profitability and risk in GCC countries: Islamic vs. conventional banks. Afro-Asian Journal of Finance and Accounting, 9(3), 243–268. https://doi.org/10.1504/AAJFA.2019.100976
Hassan, M. K., & Kayed, R. N. (2009). The global financial crisis, risk management and social justice in Islamic finance. ISRA International Journal of Islamic Finance, 1(1), 33–58. https://doi.org/10.55188/ijif.v1i1.63
Husaeni, U. A. (2017). Determinan pembiayaan pada bank pembiayaan rakyat syariah di Indonesia [Determinants of financing in Islamic people’s financing banks in Indonesia]. Esensi, 7(1), 49–62. https://doi.org/10.15408/ess.v7i1.4542
Hussain, M., Shahmoradi, A., & Turk, R. (2015). An overview of Islamic finance (IMF Working Papers WP/15/120; pp. 1–35). The International Monetary Fund. https://www.imf.org/external/pubs/ft/wp/2015/wp15120.pdf
IHS Global Inc. (2022). EViews 12 University Edition for Windows. IHS Global Inc.
Indriyanto, T. Y., Iskandar, R., & Deviyanti, D. R. (2018). Pengaruh debt financing dan equity financing terhadap return on equity pada bank syariah yang terdaftar di Bank Indonesia [The effect of debt financing and equity financing on return on equity in Islamic banks registered with Bank Indonesia]. Akuntabel, 15(2), 139–147. https://doi.org/10.30872/jakt.v15i2.4540
Iswanto, B., Pratiwi, A., & Anwar, I. (2023). Measuring the performance of Islamic banks through risk profile, earning, and capital. Ekspansi: Jurnal Ekonomi, Keuangan, Perbankan, dan Akuntansi, 15(1), 1–19. https://doi.org/10.35313/ekspansi.v15i1.4631
Jusni, Aswan, A., Reni Syamsuddin, A., & Taufiq Possumah, B. (2019). Financing profitability optimization: Case study on sharia business unit of regional development banks in Indonesia. Banks and Bank Systems, 14(1), 1–10. https://doi.org/10.21511/bbs.14(1).2019.01
Karamoy, H., & Elly Tulung, J. (2020). The impact of banking risk on regional development banks in Indonesia. Banks and Bank Systems, 15(2), 130–137. https://doi.org/10.21511/bbs.15(2).2020.12
Kepramareni, P., Apriada, K., Putra, I. N. F. A., & Rini, I. G. A. I. S. (2022). The effect of credit risk, capital adequacy ratio, liquidity, operational efficiency, and solvency on the financial performance of BPR in the City of Denpasar. Jurnal Ekonomi & Bisnis Jagaditha, 9(1), 7–14. https://doi.org/10.22225/jj.9.1.2022.7-14
Le, T. DQ., & Ngo, T. (2020). The determinants of bank profitability: A cross-country analysis. Central Bank Review, 20(2), 65–73. https://doi.org/10.1016/j.cbrev.2020.04.001
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