FINANCIAL RISK ANALYSIS FOR INCREASING FINANCIAL PERFORMANCE OF SHARIA BANKS IN INDONESIA
DOI:
https://doi.org/10.22441/mix.2021.v11i2.004Keywords:
Islamic corporate governance, financial performance, financing risk, islamic banksAbstract
This study examined the effect of Islamic corporate governance on financial performance using financing risk as mediation, focusing on Sharia Banks in Indonesia. The researchers applied a multiple regression analysis on data collected from annual reports of the companies from 2013 to 2018. The Islamic corporate governance variable is calculated from the self-assessment of the Islamic corporate governance implementation in Sharia Banks. Meanwhile, the financial performance of Islamic banks is illustrated by the return on assets. Financing risk is measured by the ratio of non-performing financing. This study found that Islamic corporate governance cannot increase financial performance, but Islamic corporate governance can reduce financing risk. The decrease in financing risk can improve the financial performance of Sharia Banks, so it can be said that the financing risk variable can mediate the effect of Islamic corporate governance on financial performance.
References
Abdullah, M. A. (2010). Corporate Governance in Sharia Banking in Indonesia. Yogyakarta: Ar-Ruzz Media.
Aebi, V., G. Sabato, and M. S. (2011). “Risk Management Corporate Governance, and Bank Performance in the Financial Crisis.” Journal of Banking and Finance, 36(13), 3213–3266.
Ahmed A. Elamer, Aws AlHares, Collins G. Ntim, Ismail Benyazid, (2018) "The corporate governance–risk-taking nexus: evidence from insurance companies", International Journal of Ethics and Systems, https://doi.org/10.1108/IJOES-07-2018-0103
Al. Suhaibani, Mohammad and Naifar, N. (2014). Islamic Corporate Governance: Risk-Sharing and Islamic Preferred Shares. Journal of Business Ethics, 124(4).
Alkhamees, A. (2013). The impact of Shari’ah governance practices on Shari’ah compliance in contemporary Islamic finance. Journal of Banking Regulation, 14(2), 134–163.
Alnasser, Sulaiman Abdullah Saif and Muhammed, J. (2012). Introduction to corporate governance from Islamic perspective. Humanomics, 28(3).
Asrori, S. N. (2016). The Effect of Good Corporate Governance Implementation on Profit Sharing Financing Through Banking Risk. Accounting Analysis Journal., 5(4). https://doi.org/ISSN: 2252-6765
Bank Indonesia. Regulation of Bank Indonesian about Quality Assessment of Commercial Bank (2006).
Bank Indonesia. Circular Letter, Pub. L. No. No.12/13/DPBS (2010).
Bank Indonesia. (2013). The Management of Good Corporate Governance. Retrieved from www.bi.go.id.
Bourakba and Zerargui. (2015). “The relationship Between Credit Risk and Corporate Governance in Islamic Banking: An empirical study.". Journal Business Management and Economics, 3(4), 67–73.
Center Bureau of Statistics. (2016). Population Cencus. Retrieved from www.bps.go.id.
El Tiby, A. M. and W. G. (2015a). Corporate Governance and Shari’a Compliance Book Editor(s): Retrieved from https://doi.org/10.1002/9781119204343.ch8%0A
El Tiby, A. M. and W. G. (2015b). Toward a Systemic Shari’a Governance Framework.
Financial Services Authority. Circular Letter about Tranparency, Report of Publication of Sharia Commercial Bank and Sharia Business Unit (2015).
Financial Services Authority. (2018). Statistic of Indonesian Sharia Banking. Retrieved from www.ojk.go.id
Ghaffar. (2014). ”Corporate Governance and Profitability of Islamic Banks Operating in Pakistan.”. Interdisciplinary Journal of Contemporary Research in Business (IJCRB), 6(6), 320–336.
Ghozali, I. (2016). The Aplication of Multivariate Analysis using The Program of IBM SPSS 23. Semarang: Diponegoro University Publisher.
Grassa, R. (2016). Corporate governance and credit rating in Islamic banks: Does Shariah governance matters? Journal of Management & Governance, 20(4).
Gupta, P. and A. M. S. (2013). A study of The Impact of Corporate Governance Practices on Firm Performance in Indian and South Korean Companies. In Procedia–Social and Behavioral Sciences (Vol. 133, pp. 4–11).
Haider, N., N. Khan, and N. I. (2015). “Impact of Corporate Governance on Firm Financial Performance in Islamic Financial Institution". International Letters of Social AndHumanistic Sciences, 51, 106–110.
Hanafi, M.M., and Halim, A. (2012). Financial Statement Analysis (2nd Ed). Yogyakarta: STIM YKPN Publisher.
Heenetigala and Armstrong. (2011). The Impact of Corporate on Firm Performance in an Unstable Economic and Political Enviroment: Evidence from Sri Lanka. In Financial Markets dan Corporate Governance Conference. Working Paper Series Social Science Research Network.
Hoque M.Z., R.M. Islam, and H. A. (2013). Corporate Governance and Bank Performance: The Case of Bangladesh. Social Science Electronic Publishing.
Indriastuti, Maya and Kartika, I. (2018a). Factors That Affect The Financing Volume in The Sharia Commercial Banks. Trikonomika, 17(1), 38–42. https://doi.org/ISSN 1411-514X (print) / ISSN 2355-7737 (online)
Indriastuti, Maya and Kartika, I. (2018b). The Minimalization of Non Performing Financing in Improving The Performance Sharia Bank. Semarang: Unissula Press.
Karim Ginena. (2014). Sharī‘ah risk and corporate governance of Islamic banks. Corporate Governance: The International of Business in Society, 14(1).
Kebede and Selvaraj. (2015). “The Impact of Credit Risk on Profitability Performance of Commercial Banks in Ethiopia Milion Gizaw.” African Journal of Business Management, 9(2), 59–66.
Khuram Shahzad Bukhari, Hayat M. Awan, and F. A. (2013). An evaluation of corporate governance practices of Islamic banks versus Islamic bank windows of conventional banks: A case of Pakistan. Management Research Review, 36(4).
Luqman, O. S. (2014). ”The Effect of Credit Risk on the Performance of Commercial Banks in Nigeria.”. Social Science Research Network.
M.Kabir Hassan, O. A. F. S. M. (2017). The governance, risk-taking, and performance of Islamic banks. Journal of Financial Services Research, 51(2), 195–219.
Majdi A. Quttainah and Ali R. Almutairi. (2017). Corporate ethics: evidence from Islamic banks. Journal of Management & Governance, 21(4), 815–840.
Mansour, Walid and Bhatti, M. I. (2018). The new paradigm of Islamic corporate governance. Managerial Finance, 44(5).
Masudul Alam Choudhury and Mohammad Nurul Alam. (2013). Corporate governance in Islamic perspective. International Journal of Islamic and Middle Eastern Finance and Management, 6(3).
Mishari M. Alfraih, "The role of corporate governance in intellectual capital disclosure", Humanomics, https://doi.org/10.1108/IJOES-02-2017-0026
Mohammed and Fatimoh. (2012). ”Impact of Corporate on Banks Performance in Negeria.”. Journal of Emerging Trends in Economics and Management Sciences (JETEMS), 3(3), 257–260.
Naysary, S. N. S. O. and B. (2014). Toward a comprehensive theoretical framework for Shariah governance in Islamic financial institutions. Journal of Financial Services Marketing, 19(4), 304–318.
Paul. (2015). ”Impact of Corporate Governance on Financial Performance of Microfinance Bank in North Central Nigeria.”. International Journal of Humanities Social and Education (IJHSSE), 2(1), 153–170.
Regulation of Bank Indonesia. The Implementation of Good Corporate Governance in Sharia Commercial Bank and Sharia Business Unit (2009).
Rehman, R. and I. M. (2012). “Does Corporate Governance Influence Banking Performance?” Journal of Leadership, Accountability and Ethics, 9(3), 86–92.
Sutedi, A. (2011). Good Corporate Governance. Jakarta: Sinar Grafika.
Switzer and Wang. (2013). “Default Risk Estimation, Bank Credit, and Corporate Governance.” Journal Financial Markets, Institutiona and Instruments, 22(2), 91–112.
Triyuwono. (2015). Perspective of Sharia Accounting: Theory and Methods (2nd Ed). Jakarta: Raja Grafindo Persada Company.
Vo, D. H. and T. M. N. (2014). “The Impact of Corporate Governanceon Firm Performance: Empirical Study in Vietnam.” International Journal of Economics and Finance, 6(6), 1–13.
Downloads
Additional Files
Published
How to Cite
Issue
Section
License
The copyright to this article is transferred to Universitas Mercu Buana (UMB) if and when the article is accepted for publication. The undersigned hereby transfers any and all rights in and to the paper including without limitation all copyrights to UMB. The undersigned hereby represents and warrants that the paper is original and that he/she is the author of the paper, except for material that is clearly identified as to its original source, with permission notices from the copyright owners where required. The undersigned represents that he/she has the power and authority to make and execute this assignment.
We declare that this paper has not been published in the same form elsewhere.
Furthermore, I/We hereby transfer the unlimited rights of publication of the above mentioned paper in whole to UMB. The copyright transfer covers the right to reproduce and distribute the article, including reprints, translations, photographic reproductions, microform, electronic form (offline, online) or any other reproductions of similar nature.
The corresponding author signs for and accepts responsibility for releasing this material on behalf of any and all co-authors. This agreement is to be signed by at least one of the authors who have obtained the assent of the co-author(s) where applicable. After submission of this agreement signed by the corresponding author, changes of authorship or in the order of the authors listed will not be accepted.
Retained Rights/Terms and Conditions
Although authors are permitted to re-use all or portions of the Work in other works, this does not include granting third-party requests for reprinting, republishing, or other types of re-use.
