Profitability of Islamic banks in Malaysia: An empirical analysis

Wasiuzzaman, Shaista and Ahmad Tarmizi, Hanimas-Ayu (2010) Profitability of Islamic banks in Malaysia: An empirical analysis. Journal of Islamic Economics, Banking and Finance (JIEBF), 6 (4). pp. 53-68. ISSN 2070-4658

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Abstract

Malaysia is one of the countries that have implemented the concept of Islamic finance in its banking industry. The increasing value of the industry has made Malaysia one of the most significant hubs in dealing with Islamic finance. This paper examines the impact of bank characteristic as well as macroeconomic determinants on the profitability of Islamic banks in Malaysia. Ordinary Least Squares (OLS) method was used to analyze the data collected from 16 Islamic banks/windows in order to understand the determinants of Islamic banking profitability in Malaysia. Bank-specific determinants like, capitalization, asset quality, liquidity and operational efficiency were regressed against profitability. In addition, macroeconomic variables like gross domestic product and inflation were also included in the analysis. The results of this study shows that capital and asset quality have an inverse relationship with bank profitability while liquidity and operational efficiency have a positive influence. Finally, the macroeconomic variables show that both inflation and growth domestic product have positively influenced the bank profitability.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Management (FOM)
Depositing User: Ms Rosnani Abd Wahab
Date Deposited: 11 Feb 2014 03:55
Last Modified: 11 Feb 2014 03:55
URI: http://shdl.mmu.edu.my/id/eprint/5129

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