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All Journal Shirkah: Journal of Economics and Business Tasharruf: Journal Economics and Business of Islam
Agus Widarjono
Faculty of Business and Economics, Universitas Islam Indonesia, Yogyakarta
Religion Economics, Econometrics & Finance Social Sciences

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Determinants of Bank Capital in Indonesian Islamic Banks Agus Widarjono; Munrokhim Misanam
Shirkah: Journal of Economics and Business Vol. 9 No. 3 (2024)
Publisher : Universitas Islam Negeri Raden Mas Said Surakarta

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.22515/shirkah.v9i3.592

Abstract

Bank capital is the linchpin for Islamic banks to steer clear insolvency risk. However, studies on Islamic bank capital in Indonesia remain scarce, with existing studies failing to distinguish between Islamic commercial banks and Islamic business units. Our research analyzes the determinants of Islamic bank capital using the latest data and splits them into Islamic commercial banks and Islamic business units. We used quarterly data from 31 Islamic banks from 2014 to 2020. The estimation method used in this study was panel data regression with unbalanced panel data. The results reveal that bank capital is positively affected by bank size, bank margin, and financing. Conversely, competition, inefficiency, and non-performing financing worsen Islamic bank capital. In addition, bank size and margin have a more pronounced impact on Islamic commercial banks than on Islamic business units. However, inefficiency and non-performing financing have a stronger impact on bank capital for Islamic business units than for Islamic commercial banks. These findings have several important implications, suggesting that Islamic bank capital can be boosted through increased margins and efficiency, while reducing impaired financing is crucial for capital accumulation.
Market Power and Profitability of Islamic Rural Banks: The Role of Ownership Structure and Geographic Location Agus Widarjono
Tasharruf: Journal Economics and Business of Islam Vol 11, No 1 (2026): JUNE
Publisher : IAIN Manado

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.30984/tjebi.v11i1.3888

Abstract

This paper analyzes the influence of market power on the profitability of Islamic rural banks (IRBs) in Indonesia, with ownership and location incorporated as moderating variables and several control variables included in the empirical model. Profitability is measured by return on assets (ROA), while market power is proxied by the Lerner Index. The control variables consist of bank-specific internal factors and macroeconomic conditions that may also affect bank profitability. The study examines 154 Islamic rural banks over the period from 2015 to 2023 using quarterly observations and an unbalanced panel data structure. To account for the dynamic characteristics of bank profitability and potential endogeneity issues, this study employs dynamic panel data regression estimated using the system generalized method of moments (system GMM). The empirical results show that market power is an important variable influencing the profitability of IRBs. Another important finding indicates that the effect of market power on profitability becomes stronger when IRBs are owned by local governments. In contrast, the influence of market power on profitability decreases for IRBs located on the island of Java. These findings imply that healthy market power needs to be supported by managerial efficiency in order to improve the competitiveness and profitability of IRBs. In addition, considering the importance of geographical differences, the Financial Services Authority (OJK) should develop policies for IRBs through a spatially differentiated policy approach that takes into account variations in location.
Co-Authors Munrokhim Misanam