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This Author published in this journals
All Journal Economics & Islamic Finance Journal
Inka Nur Aini
Universitas Mercu Buana
Humanities Decision Sciences, Operations Research & Management Economics, Econometrics & Finance Social Sciences

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How Efficiency, Capital, and Leverage Shape Islamic Bank Profitability: The Moderating Role of Asset Size Inka Nur Aini; Lucky Nugroho
Economics & Islamic Finance Journal (ECIF) Vol. 3 No. 1 (2026): ECIF Journal April 2026
Publisher : Baca Dulu Publisher

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.70550/ecif.v3i1.295

Abstract

This study investigates the effects of operational efficiency (OER), capital adequacy (CAR), and leverage (DER) on the profitability (ROA) of Indonesian Islamic commercial banks, while examining the moderating role of bank asset size. Utilizing an unbalanced panel dataset of 43 bank-year observations across 12 Islamic commercial banks from 2021 to 2024, the empirical framework applies pooled regression and hierarchical Moderated Regression Analysis complemented by heteroskedasticity-robust HC3 standard errors. The methodology integrates an Indicator Saturation procedure to rigorously identify and treat nine specific extreme observations without discarding valid longitudinal bank series. The findings reveal that OER exerts a robust negative impact on ROA, demonstrating that escalating operating cost burdens directly erode bank profitability, whereas CAR and DER display no significant direct effects. Moderation analyses confirm that asset size significantly amplifies the adverse effect of leverage on profitability under the robust HC3 specification. These results imply that long-term financial sustainability in Islamic banking relies less on sheer balance-sheet expansion and more on strict cost containment, productive asset allocation, and disciplined funding structures, particularly for large institutions navigating leveraged operations.
Co-Authors Lucky Nugroho