Roziq, Ahmad; Ahmad, Zakiyyah Ilma
A icle
Enhancing pe o mance: minimizing isk in Islamic banks
in Indonesia
Cogen Business & Managemen
P o ided in Coope a ion wi h:
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Sugges ed Ci a ion: Roziq, Ahmad; Ahmad, Zakiyyah Ilma (2024) : Enhancing pe o mance:
minimizing isk in Islamic banks in Indonesia, Cogen Business & Managemen , ISSN 2331-1975,
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Enhancing pe o mance: minimizing isk in
Islamic banks in Indonesia
Ahmad Roziq & Zakiyyah Ilma Ahmad
To ci e his a icle: Ahmad Roziq & Zakiyyah Ilma Ahmad (2024) Enhancing pe o mance:
minimizing isk in Islamic banks in Indonesia, Cogen Business & Managemen , 11:1, 2294519,
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ACCOUNTING, CORPORATE GOVERNANCE &
BUSINESS ETHICS | RESEARCH ARTIClE
Cogen Business & ManageMen
2024, VoL. 11, no. 1, 2294519
Enhancing pe o mance: minimizing isk in Islamic banks in
Indonesia
Ahmad Roziqa and Zakiyyah Ilma Ahmadb
auni e si y o Jembe , Jembe , indonesia; bs ies Babussalam Jombang, Jombang, indonesia
ABSTRACT
This s udy explo es whe he isk media es he ela ionship be ween good co po a e
go e nance (GCG), Sha ia capi al s uc u e, and Sha ia inancing s uc u e on he
inancial pe o mance o Islamic banks in Indonesia. The esea ch u ilized pu posi e
sampling, selec ing a sample o nine banks om 2014 o 2021. The da a analysis
echnique employed a licensed Sma Pa ial leas Squa es (PlS) p og am. The ini ial
indings e eal ha GCG signi ican ly educes isk bu does no di ec ly impac inancial
pe o mance. Second, he composi ion o Sha ia capi al s uc u es has a limi ed
in luence on isk bu signi ican ly hinde s inancial pe o mance. Thi d, he Sha ia
inancing s uc u e signi ican ly and nega i ely impac s isk and inancial pe o mance.
Fou h, isk has a signi ican nega i e e ec on inancial pe o mance. Fi h, Islamic
bank isk media es he ela ionship be ween Sha ia inancing s uc u e and inancial
pe o mance. I also media es he ela ionship be ween GCG and inancial pe o mance
bu does no media e he ela ionship be ween Sha ia capi al s uc u e and inancial
pe o mance. These esul s sugges ha o enhance inancial pe o mance and minimize
isks, he managemen o Islamic banks should p io i ize imp o ing inancing p ac ices
and implemen ing GCG measu es. The indings o his s udy can be applied by Islamic
banks wo ldwide. The s udy iden i ies nine ypes o Islamic bank isks ha can be
employed o assess he isk p o ile o Islamic banks and e en o c ea e a comp ehensi e
isk p o ile. This mul idimensional amewo k illumina es he in ica e in e play be ween
hese a iables wi hin Islamic banks, o e ing aluable insigh s o esea che s and
p ac i ione s in his ield.
IMPACT STATEMENT
We belie e ha ou esea ch signi ican ly con ibu es o he public in e es and has
a - eaching socie al impac . This indings can be le e aged by academics, esea che s, and
p ac i ione s o build upon and e ine exis ing heo ies and p ac ices.
1. In oduc ion
The de elopmen o Islamic banks in Indonesia se es as a benchma k o he success o he Sha ia
economy. One no able indica o o he success o Islamic banks is e lec ed in hei inancial pe o -
mance. Financial pe o mance analysis assesses how much a company app op ia ely adhe es o inancial
implemen a ion ules. Munawi (2010) explains ha inancial pe o mance is a aluable ounda ion o
e alua ing a company’s inancial condi ion, conduc ed h ough an analysis o inancial a ios. Bo h man-
agemen and s akeholde s equi e insigh s om inancial pe o mance measu emen s o gauge he com-
pany’s condi ion and success in execu ing i s ope a ional ac i i ies.
Keown (2001) explains ha inancial a ios c ucial o iden i ying he inancial pe o mance o banks
include liquidi y a ios, p o i abili y a ios, sol ency a ios, business e iciency a ios, deb a ios, and ma -
ke alue a ios. Acco ding o So yan (2002), he mos in luen ial and signi ican indica o o e alua ing
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT ahmad Roziq ahmad oziq[email p o ec ed] uni e si y o Jembe , Jembe , indonesia.
h ps://doi.o g/10.1080/23311975.2023.2294519
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
Recei ed 14 Sep embe
2023
Re ised 7 Decembe 2023
Accep ed 8 Decembe
2023
KEYWORDS
Sha ia capi al s uc u e;
Sha ia inancing s uc u e;
good co po a e
go e nance; isk; inancial
pe o mance
REVIEWING EDITOR
Collins N im, Uni e si y o
Sou hamp on, Uni ed
Kingdom o G ea B i ain
and No he n I eland
JEL CLASSIFICATION
M41; M48; G32
2 A. ROZIQ AND Z. IlMA AHMAD
all ac i i ies in he banking indus y is p o i abili y indica o s, which can be measu ed using e u n on
equi y (ROE) and e u n on asse (ROA) da a. O he a io indica o s de e mining inancial pe o mance in
Islamic banks include he capi al adequacy a io (CAR), non-pe o ming inancing (NPF), inancing o
deposi a io (FDR), ope a ing expenses o ope a ing income, and ne ope a ing ma gin (NOM).
Da mawi (2011) explains ha he ac o s in luencing inancial pe o mance, as used o assess bank
heal h, include capi al, asse quali y, managemen , ea nings, liquidi y, and sensi i i y o he ma ke
(CAMEl). Regula o y guidelines abou assessing banks’ soundness, as ou lined in Ci cula le e No.9/24/
DPbS conce ning he sys em o e alua ing he soundness le el o Islamic Banks based on Sha ia
P inciples, allow o e alua ion based on he CAMEl ac o s. The assessmen o he soundness le el o
Islamic banks and Sha ia business uni s is go e ned by Financial Se ices Au ho i y Regula ion Numbe
8/POJK.03//2014 This egula ion s ipula es ha Islamic banks can unde go indi idual heal h-le el assess-
men s, including isk p o ile, good co po a e go e nance, ea nings (p o i abili y), and capi al (RGEC).
2. Backg ound
In he egula ions go e ning capi al s uc u e and inancing s uc u e, an in eg al aspec in luencing
co po a e go e nance is delinea ed by Bank Indonesia in PBI No. 11/33/PBI/2009 (Bank Indonesia, 2009).
Bank go e nance, as ou lined in hese egula ions, is dis inguished by i s commi men o p inciples
such as accoun abili y, anspa ency, esponsibili y, and p o essionalism, all oo ed in a dedica ion o
ai ness. Co po a e go e nance holds pa amoun impo ance wi hin companies, especially in he con-
ex o bank pe o mance. Empi ical indings om hypo hesis es ing subs an ia e he posi i e in luence
o Good Co po a e Go e nance (GCG) on he inancial pe o mance o Islamic banks (Bank Indonesia,
2009). A s udy by ledi and Xemalo dzo (2023) e ealed ha sound co po a e go e nance p ac ices
augmen bo h he co po a e image and pe o mance o i ms.
Al Kayed (2014) elucida es ha capi al ac o s a e ep esen ed by capi al s uc u e, which pe ains o
he selec ion o unding comp ising equi y o liabili ies, exe ing a signi ican impac on inancial pe -
o mance. Acco ding o agency heo y, implemen ing capi al s uc u e mi iga es con lic s among s ake-
holde s, pa icula ly be ween in es o s and manage s. The s udy alida es indings om la asa i (2016),
indica ing ha ele a ed capi al a ios lead o a de e io a ion in pe o mance. This is a ibu ed o he
highe equi ed e u n on sha es, esul ing in an escala ion o he cos o equi y capi al, consequen ly
leading o a educ ion in company p o i s and, he e o e, a decline in o e all company pe o mance.
The esea ch indings by Dahlia (2021) indica e ha inancing and liquidi y isks do no signi ican ly
impac Islamic banks’ inancial pe o mance. Howe e , i is obse ed ha simula ed and liquidi y isks
a ec he inancial pe o mance o Islamic banks. Islamic banks engage in isk managemen o op imize
he ade-o be ween isk and e enue, aiding in he s a egic planning and de elopmen o inancing
in an app op ia e and e icien manne .
The capi al s uc u e heo y employing he Modigliani-Mille (MM) app oach posi s ha as he p opo ion
o capi al om deb inc eases, so does he isk aced by he company. Howe e , his heo y is p edomi-
nan ly applicable o con en ional banks. In con as , he same p inciples do no apply o Islamic banks,
whe e a highe capi al s uc u e does no ansla e o highe isk. This is because Islamic banks’ capi al is
sou ced no om deb and owne ’s equi y bu a he om empo a y shi ka unds (Roziq e al., 2021).
Resea ch by Roziq e al. (2021) demons a es ha capi al adequacy signi ican ly impac s p o i abili y,
indica ing ha highe a ailable capi al leads o inc eased p o i s o Islamic banks. Addi ionally, esea ch
by Pa as hiwi and Budiasi e eals ha c edi isk has no been e ec i e in mode a ing he in luence o
capi al adequacy (CAR) on p o i abili y (ROA). Simila ly, Ra i U ami and U ami (2021) esea ch s a es ha
p oblema ic inancing ails o mode a e CAR wi h ROA. Financing cons i u es one o he und dis ibu ion
p oduc s a Islamic banks, necessi a ing ca e ul a en ion o con olling and supe ising p o i -sha ing
inancing p oduc s. Inadequa e con ol and supe ision inc ease he isk o occu ences, he eby a ec ing
he inancial pe o mance o Islamic banks. This asse ion is suppo ed by Dwi Faz iani and Gusliana Mais
(2019) esea ch, which indica es ha muda abah inancing, musha aka inancing, and mu abahah inanc-
ing posi i ely in luence ROA h ough isk as an in e ening a iable.
Th ough c edi isk, independen commissione s, he boa d o di ec o s, and manage ial owne ship
in luence p o i abili y. In o he wo ds, c edi isk can se e as an in e ening a iable o Good Co po a e
COGENT BUSINESS & MANAGEMENT 3
Go e nance (GCG). The e o e, his s udy es ablishes ha he e ec i e implemen a ion o GCG, coupled
wi h sound isk managemen , has he po en ial o enhance bank p o i abili y. The handling and manag-
ing o exis ing isks, pa icula ly c edi isk, a e essen ial in ealizing GCG. Main aining bank isks wi hin
minimal limi s is a c ucial indica o o he success ul implemen a ion o GCG. This asse ion is suppo ed
by he indings o o he s udies, which sugges ha isk managemen can unc ion as an in e ening
a iable be ween GCG and pe o mance (A yani, 2019).
This esea ch aims o add ess issues abou he inancial pe o mance o Islamic banks by examining
in luencing ac o s, speci ically he Islamic capi al s uc u e, Islamic inancing s uc u e, and GCG. The
s udy inco po a es in e media y a iables, ep esen ed by Islamic bank isk a iables, o es ablish connec-
ions be ween hese elemen s. E icien and e ec i e implemen a ion o Sha ia capi al s uc u e, Sha ia
inancing s uc u e, and GCG is expec ed o impac bank isks, ul ima ely minimizing losses a ising om
ope a ional isks. The adep managemen o isks wi hin Islamic banks is an icipa ed o indi ec ly in lu-
ence inancial pe o mance, concluding ha Islamic banks a e posi ioned a o ably. Resea che s con-
duc ed his s udy o analyze he in luence o Sha ia capi al s uc u e, Sha ia inancing s uc u e, and GCG
on inancial pe o mance h ough he lens o isk.
This esea ch add esses se e al ac o s ha in luence inancial pe o mance: he Sha ia capi al s uc-
u e, Sha ia inancing s uc u e, good co po a e go e nance, and isk. The an icipa ed bene i s o his
esea ch a e as ollows:
a. The s udy aims o enhance academic unde s anding o he impac o Sha ia capi al s uc u e, Sha ia
inancing s uc u e, and good co po a e go e nance on inancial pe o mance h ough isk.
b. This esea ch can p o ide insigh s in o he ac o s in luencing inancial pe o mance, speci ically by
examining he e ec s o Sha ia capi al s uc u e, Sha ia inancing s uc u e, and good co po a e go -
e nance on he inancial pe o mance o Islamic banks h ough Islamic bank isk.
c. The indings o his esea ch a e expec ed o o e aluable insigh s o managemen decision-making
in e ms o isk managemen , he eby in luencing he inancial pe o mance o Islamic banks.
d. This esea ch is in ended o se e as a e e ence o u u e s udies o u he esea ch explo ing he
in luences o isk and inancial pe o mance om a ious aspec s, pa icula ly in Sha ia inancial
accoun ing.
3.Theo e ical li e a u e e iew
3.1. Financial pe o mance
Acco ding o egula ions and guidelines, inancial pe o mance analysis assesses he ex en o which a
company adhe es o p ope and accu a e inancial managemen p ac ices. This e alua ion comp ehen-
si ely examines he company’s inancial s a emen s and o he ele an ac o s ha suppo he assess-
men o inancial pe o mance. Mu asowi in (2014), emphasized ha inancial pe o mance analysis
de e mines he deg ee o which a company has adhe ed o inancial ules. In his con ex , a egula ion
issued by he Financial Se ices Au ho i y, SEOJK No. 05, 2019, delinea es inancial en i ies’ Heal h le el
Assessmen Sys em. Wi hin his amewo k, p o i abili y ac o s a e analyzed, p ima ily u ilizing he ope -
a ional e iciency a io as a key me ic and complemen ed by he moni o ing a io, which includes he
e u n on asse and e u n on equi y a ios.
3.2. Sha ia capi al s uc u e
Capi al s uc u e is he combina ion o a company’s deb and equi y ha i employs o inance i s asse s.
In Islamic banks, he componen s o capi al s uc u e a e de i ed om h ee sou ces: liabili ies, empo-
a y shi ka unds, and equi y (Wahyulaili e al., 2018). S a emen o Financial Accoun ing S anda ds num-
be 105 (2017) conce ning Muda abah Accoun ing and numbe 106 (2017) managing musha aka
Accoun ing, de ines empo a y shi ka und as unds ecei ed as in es men s wi hin a speci ied pe iod
om indi iduals and o he pa ies whe e he bank has he igh o manage and in es he unds. The
4 A. ROZIQ AND Z. IlMA AHMAD
dis ibu ion o in es men e u ns is based on a p e-ag eed a angemen . Examples o empo a y shi ka
unds include eceip s om in es men unds such as muda abah mu hlaqa, muda abah muqayyada,
musha aka, and o he simila accoun s. The ela ionship be ween he bank and he und owne is a
pa ne ship based on he con ac o muda abah mu hlaqa, muda abah muqayyada, o musha aka.
3.3. Sha ia inancing s uc u e
The inancing s uc u e illus a es he composi ion o inancing be ween hose de i ed om ixed-p o i
buying and selling pa e ns, a iable p o i -sha ing pa e ns, and en al pa e ns. These pa e ns ha e
become in eg al inancing p oduc s wi hin Islamic banks. This inancing s uc u e signi ican ly impac s
he p o i s gene a ed, he eby in luencing he bank’s inancial pe o mance (Muhammad, 2021). In
und alloca ion, Islamic banks can o e a ious o ms o inancing, including muda abah and musha aka
inancing (wi h a p o i -sha ing pa e n), mu abahah and salam (in ol ing buying and selling pa -
e ns), is ishna (simila o salam), and ija ah (in ol ing ope a ional and inancial lease pa e ns).
3.4. Good co po a e go e nance
Bank Indonesia egula es he implemen a ion o Co po a e Go e nance (GCG) in Islamic banks h ough
egula ion no. 11/33/PBI/2009 (Bank Indonesia, 2009), which delinea es he s anda ds o GCG in Islamic
banks and Sha ia business uni s. A icle 2 o his egula ion manda es ha all Islamic banks in eg a e
GCG p inciples in o e e y ace o hei business ac i i ies ac oss all o ganiza ional le els. GCG se es as
a amewo k o laws, egula ions, and ules ha mus be diligen ly ollowed, p omo ing he e icien
u iliza ion o company esou ces and gene a ing sus ainable, long- e m economic alue o bo h sha e-
holde s and socie y.
Islamic banks, as pa o hei commi men o GCG, egula ly conduc sel -assessmen s o implemen
he i e co e p inciples o GCG. These p inciples a e ho oughly e alua ed h ough ele en assessmen
ac o s, as ou lined in he Ci cula le e issued by he Financial Se ices Au ho i y unde no. 10/
SEOJK.03/2014 (Financial Se ices Au ho i y (OJK), 2014) ega ding assessing he Heal h le el o Islamic
banks and Sha ia Business Uni s. These ac o s a e ca ego ized in o i e dis inc g oups. The hie a chy o
hese anking ca ego ies signi ies he deg ee o which GCG p inciples a e e ec i ely applied in p ac ice.
3.5. Risk
Risk is essen ially he po en ial o loss a ising om a speci ic e en . This concep is go e ned by he
Financial Se ices Au ho i y Regula ion No. 65/POJK.03/2016 (Financial Se ices Au ho i y (OJK), 2016),
which ou lines guidelines o Risk Managemen in Islamic banks and Sha ia Business Uni s. The Financial
Se ices Au ho i y Regula ion u he s eng hens his egula o y amewo k: No. 8/POJK.03/2014 2014)
ou lines p o ocols o assessing he heal h le el o banks and Sha ia Business Uni s. Acco ding o hese
egula ions, banks a e equi ed o manage en dis inc ypes o isks, namely ma ke , c edi , ope a-
ional, liquidi y, legal, epu a ion, compliance, a e o e u n, s a egy, and equi y in es men isks.
4. Empi ical li e a u e e iew and hypo heses de elopmen
4.1. Good co po a e go e nance and inancial pe o mance
The ela ionship be ween good co po a e go e nance and inancial pe o mance is empi ically suppo ed
by he esea ch conduc ed by Ekaningsih and A ka ina (2021). Thei s udy demons a es ha he imple-
men a ion o be e Co po a e Go e nance (GCG) leads o an imp o emen in bank p o i abili y, as mea-
su ed by Re u n on Asse s (ROA). Addi ionally, he esea ch conduc ed by ledi and Xemalo dzo (2023)
e eals ha good co po a e go e nance p ac ices no only enhance he co po a e image bu also con-
ibu e o he o e all pe o mance o i ms.
Hypo hesis 1: Good co po a e go e nance has a signi ican e ec on inancial pe o mance.
COGENT BUSINESS & MANAGEMENT 5
4.2. Good co po a e go e nance and isk
The ela ionship be ween good co po a e go e nance and isk is empi ically suppo ed by he indings
o esea ch conduc ed by Komang He y (2019). The s udy indica es ha he impac o good co po a e
go e nance, ep esen ed by independen commissione s, has a mi iga ing e ec on c edi isk. This is
a ibu ed o he supe ision ca ied ou by independen commissione s, se ing as a c ucial indica o in
adhe ing o he p inciple o p udence (p uden ial banking p ac ices), he eby minimizing he c edi isk
aced. Consis en wi h he esea ch conduc ed by Elame e al. (2020), he Sha ia supe iso y boa d,
block owne ship, boa d independence, and coun y-le el go e nance quali y exhibi s a is ically signi i-
can and posi i e associa ions wi h ope a ional isk disclosu es. Fu he mo e, Chouaibi e al. (2023)
e ealed ha go e nance pe o mance in luences inancial isk disclosu e.
Hypo hesis 2: Good co po a e go e nance has a signi ican e ec on isk.
4.3. Risk and inancial pe o mance
The ela ionship be ween isk and inancial pe o mance is empi ically ein o ced by he esea ch con-
duc ed by Almunawwa oh and Ma liana (2018). Thei indings indica e ha Non-Pe o ming loans (NPF)
nega i ely a ec p o i abili y. This ela ionship is u he subs an ia ed by he esul s o Ma lina and Diana
(2021)’s esea ch, which demons a es ha an ele a ed isk o p oblema ic inancing (NPF) leads o a
educ ion in p o i abili y (measu ed by Re u n on Asse s, ROA). Addi ionally, he s udy conduc ed by
Kwashie e al. (2022) e eals ha non-pe o ming loans ha m inancial pe o mance.
Hypo hesis 3: Risk has a signi ican e ec on inancial pe o mance.
4.4. Sha ia capi al s uc u e and inancial pe o mance
The ela ionship be ween Sha ia capi al s uc u e and inancial pe o mance is empi ically ein o ced
by he esul s o esea ch conduc ed by Ma dha illah e al. (2020). This s udy demons a es he
impac o capi al s uc u e, ep esen ed by he deb - o-asse a io, on inancial pe o mance p oxied
by he ne p o i ma gin. Mo eo e , he esea ch conduc ed by Rehman e al. (2023) e eals ha
s uc u al capi al e iciency is signi ican ly associa ed wi h ea nings pe sha e, e u n on asse s, and
e u n on equi y.
Hypo hesis 4: Sha ia capi al s uc u e has a signi ican e ec on inancial pe o mance.
4.5. Sha ia capi al s uc u e and isk
The ela ionship be ween Sha ia capi al s uc u e and isk is empi ically suppo ed by he esul s o
esea ch conduc ed by Fadlu ahman e al. (2021). Thei s udy asse s ha capi al (CAR) signi ican ly in lu-
ences non-pe o ming inancing (NPF). Inc eased capi al alue is associa ed wi h dec eased p oblema ic
inancing o business uni s (BUS), and ice e sa. This inding is consis en wi h he esea ch conduc ed
by Rahayu e al. (2022), which indica es ha each ime he capi al adequacy a io inc eases, inancing in
a ea s also inc eases. Addi ionally, he s udy conduc ed by Fa ouh e al. (2023) e eals ha an inc ease
in banks’ le e age a io does no esul in an inc ease in asse isk.
Hypo hesis 5: Sha ia capi al s uc u e has a signi ican e ec on isk.
4.6. Sha ia inancing s uc u e and inancial pe o mance
The ela ionship be ween Sha ia inancing s uc u e and inancial pe o mance is empi ically suppo ed
by he esea ch conduc ed by Indah P ihandini and Sa i a (2019). This s udy demons a es ha as
6 A. ROZIQ AND Z. IlMA AHMAD
muda abah inancing, a o m o Sha ia inancing, inc eases, he p o i abili y o BPRS, p oxied by Re u n
on Asse s (ROA), also inc eases. Consis en wi h he esea ch conduc ed by Agus in and Bus aman (2020),
success ul implemen a ion o muda abah inancing using a p o i -sha ing sys em by cus ome s can lead
o inc eased p o i s. Fu he mo e, he s udy conduc ed by Kulmie e al. (2023) concludes ha bo h mu a-
bahah and muda abah a e c ucial o he pe o mance and p o i abili y o Islamic banks.
Hypo hesis 6: Sha ia inancing s uc u e has a signi ican e ec on inancial pe o mance.
4.7. Sha ia inancing s uc u e and isk
The ela ionship be ween Sha ia inancing s uc u e and isk is empi ically suppo ed by he esea ch
conduc ed by Dwi Faz iani and Gusliana Mais (2019). Thei s udy indica es ha inc eased muda abah
inancing p o ided o cus ome s educes he isk o bad c edi o non-pe o ming inancing (NPF). In
con as , musha aka inancing posi i ely impac s NPF, meaning ha a highe le el o musha aka inanc-
ing p o ided by banks o hei cus ome s is associa ed wi h an inc eased isk o bad c edi . Fu he mo e,
he s udy conduc ed by Al Rahahleh e al. (2019) concludes ha bank capi al and inancing expansion
signi ican ly nega i ely impac he c edi isk le el o Islamic Banks (IBs) in Malaysia.
Hypo hesis 7: Sha ia inancing s uc u e has a signi ican e ec on isk.
4.8. Resea ch concep ual amewo k
Based on he explana ion o he ela ionship be ween hese a iables, he esea ch hypo hesis can be
desc ibed in a concise esea ch amewo k ega ding he in luence o Sha ia capi al s uc u e, Sha ia
inancing s uc u e, and good co po a e go e nance on inancial pe o mance h ough Islamic bank isk
as illus a ed in Figu e 1.
5. Me hodology
5.1. Resea ch ype
This esea ch adop s a quan i a i e me hod wi h an explana o y app oach, speci ically aimed a
elucida ing he ela ionships be ween esea ch a iables by es ing p e iously o mula ed hypo he-
ses. Pa h analysis is employed o examine whe he he hypo heses align wi h he esul s o da a
analysis.
Figu e 1. Resea ch concep ual amewo k.
COGENT BUSINESS & MANAGEMENT 7
5.2. Popula ion, sample, and me hod o sampling
The popula ion in his esea ch comp ises all 12 Islamic banks in Indonesia egis e ed wi h he Financial
Se ices Au ho i y. The sampling echnique used is pu posi e sampling based on speci ic c i e ia, which include:
a. Sha ia Banks egis e ed wi h he Financial Se ices Au ho i y
b. Islamic banks wi h consecu i ely published annual inancial epo s om 2014 o 2021.
c. Published annual inancial epo s con aining he equi ed da a ela ed o esea ch a iables.
U ilizing he pu posi e sampling me hod, h ee Islamic banks did no mee he esea ch sample c i e-
ia. As a esul , he banks ha ul illed he sample c i e ia amoun ed o nine Islamic banks. The sampling
co e ed eigh yea s, esul ing in a o al o 72 obse a ion da a poin s.
5.3. Da a
The ype o da a u ilized in his esea ch is seconda y da a, speci ically inancial da a ob ained om
annual inancial epo s ela ed o he a iables unde in es iga ion. The da a collec ion echnique
employed is documen a ion, which in ol es explo ing seconda y da a sou ced om documen s and
inancial epo s. The necessa y documen s o epo s o his esea ch a e inancial epo s published on
he o icial websi es o each o he nine Islamic banks, encompassing annual epo da a om 2014
o 2021.
5.4. Va iables
Table 1 summa izes he a iable names, ypes (no a ed as X o independen a iables, Z o in e ening
a iables, and Y o dependen a iables), indica o s, measu emen s, and scales.
Table 1. Va iables, indica o s, measu emen s and scales.
Va iables indica o s Measu emen s scales
sha ia Capi al s uc u e (X1 :
independen Va iable - 1)
1 Liabili y ( o al Liabili y/ o al asse ) × 100% Ra io
2 empo a y shi ka Fund ( o al empo a y shi ka Fund / o al asse ) × 100% Ra io
3 equi y ( o al equi y/ o al asse ) × 100% Ra io
sha ia Financing s uc u e (X2 :
independen Va iable-2)
1Mu abahah Financing ( o al Mu abahah Financing / o al Financing) × 100% Ra io
2Muda abah Financing ( o al Muda abah Financing / o al Financing) × 100%
3Musha aka Financing ( o al Financing Musha aka / o al Financing) × 100%
good Co po a e go e nance (X3
: independen Va iable - 3)
1sel assessmen Ranking 1–5 in e al
2Membe s o he Boa d o
Commissione s
∑ Membe s o he Boa d o Commissione s Ra io
3Boa d o Commissione s
Mee ing
∑ Boa d o Commissione s Mee ing Ra io
4Membe o he Boa d o
Di ec o s
∑ Membe o he Boa d o Di ec o s Ra io
5Boa d o Di ec o s Mee ing ∑ Boa d o Di ec o s Mee ing Ra io
6Membe o he sha ia
supe iso y Boa d
∑ Membe o he sha ia supe iso y Boa d Ra io
7sha ia supe iso y Boa d
Mee ing
∑ sha ia supe iso y Boa d Mee ing Ra io
Risk (Z : in e ening Va iable) 1C edi Risk Ranking 1–5 in e al
2Ma ke Risk Ranking 1–5 in e al
3Liquidi y Risk Ranking 1–5 in e al
4ope a ional Risk Ranking 1–5 in e al
5Law Risk Ranking 1–5 in e al
6Repu a ion Risk Ranking 1–5 in e al
7s a egic Risk Ranking 1–5 in e al
8Compliance Risk Ranking 1–5 in e al
9Ra e o Re u n Risk Ranking 1–5 in e al
10 equi y in es men Risk Ranking 1–5 in e al
Financial Pe o mance (Y :
Dependen Va iable)
1Re u n on asse Roa Ra io Ra io
2Re u n on equi y Roe Ra io Ra io
3ope a ional e iciency Ra io Reo Ra io Ra io
14 A. ROZIQ AND Z. IlMA AHMAD
pe o mance, leading o an icipa ed nega i e e ec s. Fu he mo e, he s udy indica es ha GCG is no
expec ed o in luence inancial pe o mance di ec ly. Mo eo e , he esea ch explo es he in e ac ions
be ween hese a iables and isk, sugges ing ha Sha ia capi al s uc u e is unlikely o ha e a di ec
posi i e in luence on isk. In con as , Sha ia inancing s uc u e and GCG a e expec ed o nega i ely
a ec isk di ec ly. The s udy also an icipa es ha isk will di ec ly and nega i ely a ec inancial pe o -
mance. The hypo heses p opose ha isk may se e as a media o , posi i ely in luencing he ela ionship
be ween Sha ia inancing s uc u e, GCG, and inancial pe o mance. This mul idimensional amewo k
sheds ligh on he complex in e play among hese a iables wi hin Islamic banks, p o iding aluable
insigh s o esea che s and p ac i ione s in his ield.
7.1. Implica ion o p ac ice
This mul idimensional amewo k illumina es he in ica e in e play among hese a iables wi hin Islamic
banks, o e ing aluable insigh s o p ac i ione s in his ield. Islamic bank managemen is asked wi h
op imizing he u iliza ion o acqui ed capi al unds, pa icula ly in he dis ibu ion o unds o inancing,
o e ec i ely manage, minimize, and con ol isks, he eby enhancing he inancial pe o mance o Islamic
banks. The indings o his s udy ha e global applicabili y o Islamic banks. The s udy iden i ies nine
ypes o Islamic bank isks ha can be u ilized o assess Islamic banks’ isk p o iles and e en o mula e
a comp ehensi e isk p o ile.
7.2. Limi a ions and di ec ions o u u e esea ch
This esea ch does no encompass all Islamic banks in Indonesia, as hey ail o mee he c i e ia o
inclusion as esea ch samples. Addi ionally, Sha ia business uni s wi hin con en ional banks ha we e no
included as sample c i e ia a e excluded. This mul idimensional amewo k illumina es he in ica e in e -
play among hese a iables wi hin Islamic banks, o e ing aluable insigh s o esea che s in his ield.
Subsequen ly, esea che s can explo e whe he o he a iables may media e he ela ionships wi hin
Islamic capi al s uc u es. Fu he mo e, esea che s can inco po a e addi ional a iables, such as Sha ia
(Islamic) good co po a e go e nance and Sha ia maqhasid pe o mance. To enhance he s udy, i is ec-
ommended o include mo e da a om Islamic banks in o he coun ies.
Acknowledgmen s
We a e indeb ed o he Uni e si y o Jembe and STIES Babussalam o p o iding he suppo needed o his
esea ch. We app ecia e he e iews and commen s made by e iewe s on his pape .
Au ho s’ con ibu ions
Ahmad Roziq: C ea ion o ideas, hypo heses, esul s, discussions, a icle epo s and e ision. Zakiyyah Ilma Ahmad:
collec ing, p ocessing, unning da a in Sma PlS and e ision.
Disclosu e s a emen
The esea ch has no con lic s o in e es o decla e. Any e o s a e ou esponsibili y.
Abou he au ho s
Ahmad Roziq compe es in inancial accoun ing, Islamic accoun ing, and Islamic banking. He is a lec u e and
esea che a he Uni e si y o Jembe and an In e nal Audi o a BAZNAS in Jembe , Indonesia.
Zakiyyah Ilma Ahmad specializes in Islamic accoun ing, economics, and banking. She is a lec u e a ST IES Babussalam
Jombang, Indonesia.
COGENT BUSINESS & MANAGEMENT 15
Tool o da a analysis
The da a analysis echnique employed in his s udy in ol es using a licensed Sma Pa ial leas Squa es (PlS)
p og am.
Da a a ailabili y
The da a suppo ing he indings o his s udy a e a ailable om he co esponding au ho and second au ho upon
easonable eques .
Funding
This esea ch ecei ed no speci ic g an om any unding agency in he public, comme cial, no - o -p o i , o highe
educa ion sec o s.
ORCID
Ahmad Roziq h p://o cid.o g/0000-0001-8151-1360
Zakiyyah Ilma Ahmad h p://o cid.o g/0009-0004-0806-863X
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