A comparative study of Indonesian and Malaysian Islamic banks

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The aim of this study is to analyze the influence of the non-performing financing (NPF), financing to deposit ratio (FDR), operational efficiency ratio (OER), and firm size (SIZE) on return on assets (ROA). The object of the research is the Islamic bank in Indonesia and the Islamic bank in Malaysia for the period of 2010–2015. Another aim of this research is to determine if there are differences in the impact of FDR, NPF, OER and firm size on ROA between the Islamic bank in Indonesia and the Islamic bank in Malaysia. The findings show that not all studied independent variables affect the ROA of the Indonesian Islamic Bank and the Malaysian Islamic bank. OER has a negative and significant effect on the Indonesian Islamic Bank’s ROA, while FDR and size have a positive and significant influence on the Indonesian Islamic Bank’s ROA. In the Islamic bank of Malaysia, NPF affects ROA positively, while OER affects ROA negatively. In the Indonesian Islamic bank, independent variables that influence ROA are FDR, OER, and SIZE. In Malaysian Islamic bank, only OER influences ROA significantly. Based on the Chow test, one can conclude that there is a significant difference between the Indonesian Islamic bank and the Malaysian Islamic bank. Regarding operational costs, banks should pay more attention to validation of the costs to be incurred, so there is no need to spend unnecessary costs.

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    • Table 1. The characteristics of Indonesian and Malaysian Islamic banking
    • Table 2. The sample of Indonesian and Malaysian Islamic banks
    • Table 3. Variable description
    • Table 4. Descriptive statistics of Indonesian Islamic banks
    • Table 5. Descriptive statistics of Malaysian Islamic banks
    • Table 6. Residual normality test results
    • Table 7. Durbin-Watson test results
    • Table 8. Multicollinearity test results
    • Table 9. Glejser test results
    • Table 10. Test results of the augmented Dickey-Fuller test (first difference)
    • Table 11. Results of the regression analysis of the Indonesian Islamic banks
    • Table 12. Results of the regression analysis of Malaysian Islamic banks