The Determinants of Bank Profitability: Empirical evidence from Indonesian Sharia Banking Sector

DOI

10.2991/icebef-18.2019.6How to use a DOI?

Keywords

asset size; capital adequacy; credit risk; sharia banking; inflation; liquidity; profitability; GDP

Abstract

This paper aims to examine the internal and external determinants of sharia banks profitability in Indonesia over the period 2010 – 2017. The bank profitability is measured by return on assets (ROA) as a function of bank-internal and external determinants. Using balances data set and fixed effect model, the empirical results have found strong evidence that both internal and external factors have a strong influence on the profitability. The internal factors of the bank i.e., capital adequacy, credit risk, and asset size have a significant and negatif effect on bank profitability, while liquidity have a positive and significant impact on banks profitability. However, the external factors only inflation has a significant and positive effect, while GDP has a negatif and significant effect on banks profitability. This result suggest that banks can improve their profitability through increasing banks liquidity, reinforce their capital structure, reduce their assets sizes and credit risk, in addition banks should be anticipate the external factors, thus sharia banks will be more competitive than conventional banks.

Copyright

© 2019, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Dedi Supiyadi
AU  - Meta Arief
AU  - Nugraha Nugraha
PY  - 2019/05
DA  - 2019/05
TI  - The Determinants of Bank Profitability: Empirical evidence from Indonesian Sharia Banking Sector
BT  - Proceedings of the 1st International Conference on Economics, Business, Entrepreneurship, and Finance (ICEBEF 2018)
PB  - Atlantis Press
SP  - 21
EP  - 26
SN  - 2352-5428
UR  - https://doi.org/10.2991/icebef-18.2019.6
DO  - 10.2991/icebef-18.2019.6
ID  - Supiyadi2019/05
ER  -