<![CDATA[This study analyzes the determinants of operational efficiency in Indonesian Islamic banking, measured by the Operational Expense to Operational Income ratio (BOPO), encompassing digital transformation (JKFISIK), bank size (ASET), financing quality (NPF), external digital ecosystem (NIL), inflation (INF), and BI Rate (BIRATE). The study employs the Autoregressive Distributed Lag (ARDL) approach using monthly aggregate data from Islamic Commercial Banks and Islamic Business Units spanning January 2014 to December 2024, yielding 114 observations after adjustment. Phillips-Perron unit root tests confirm a mixed I(0) and I(1) integration order with no I(2) variables, validating the ARDL framework. The F-Bounds test produces an F-statistic of 360.50, confirming long-run cointegration. NPF emerges as the dominant determinant with a significant positive effect on BOPO, while ASET exhibits a significant positive effect contrary to the economies of scale hypothesis. JKFISIK, NIL, INF, and BIRATE are statistically insignificant. The Error Correction Term coefficient of -0.9833 indicates a 98.33 percent monthly adjustment speed toward long-run equilibrium. Parameter stability is confirmed through CUSUM tests. These findings underscore that financing quality management is the primary lever for improving operational efficiency in Indonesian Islamic banking.]]>
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