The Impact of Financing Risk and Liquidity Ratio on Profitability in Islamic Commercial Banks

Hadijah Febriana; Wirawan Suryanto

doi:10.59890/ijels.v3i8.155

Authors

Hadijah Febriana Universitas Pamulang
Wirawan Suryanto Universitas Pamulang

DOI:

https://doi.org/10.59890/ijels.v3i8.155

Keywords:

Financing Risk, Liquidity Risk, and Profitability Ratios

Abstract

The purpose of this study is to investigate how the profitability ratio (return on assets, or ROA) in Islamic commercial banks is affected by financing risk (non-performing financing, or NPF) and liquidity risk (financing to deposit ratio, or FDR). Seven Islamic Commercial Banks were chosen using purposive sampling to make up the study's sample. Multiple linear regression analysis, aided by the E-Views application, is the analytical technique used. The findings show that whereas FDR has a large negative impact on profitability, NPF has no discernible effect. Concurrently, the F-test results show that FDR and NPF work together to significantly impact Islamic Commercial Banks' profitability (ROA).

References

Arafat, W. (2015). Behind a Powerful Image: Grasping the Strategy and Keys to Success in Building a Solid Corporate Image. Yogyakarta: Andi

Arta, I., P., S., et al. (2021). Risk Management. Bandung: Widina Bhakti Persada.

Astuti, D. (2017). Corporate Financial Management. Jakarta: Ghalia Indonesia.

Azzahra, AD, & Anita, WF (2023). Market Risk and Foreign Exchange Risk against

Profitability of State-Owned General Banking Companies Listed on the IDX for the 2014-2021 Period. Socio E-Kons, 15(1), 68.

Darmawi, H. (2016). Risk Management. Jakarta: Bumi Aksara.

Fadhillah, AP, & Waluyo, B. (2022). The effect of financing risk, liquidity risk, and operational risk on the profitability of PT BTPN Syariah in 2014-2022. Proceedings of SNAM PNJ.

Fahmi, I. (2016). Human Resource Management Theory and Application.

Bandung: CV Alfabeta.

Fahmi, I. (2018). Financial Performance Analysis: A Guide for Academics, Managers, and Investors and Analyzing Business from a Financial Aspect. Bandung: Alfabeta

Ghozali, I. (2014). Multivariate Analysis Application with SPSS. Semarang: UNDIP Publishing Agency.

Gitman, L. J., & Zutter, C. J. (2015). Principles of Managerial Finance 14th Edition. In Pearson Education Limited.

Habriyanto, H., Khairiyani, K., & Alfaruq, MA (2023). The Effect of Financing Risk and Liquidity Risk on the Profitability of Islamic Commercial Banks for the 2018-2020 Period. Al Fiddhoh: Journal of Banking, Insurance, and Finance, 4(1), 57–65.

Hanafia, F., & Karim, A. (2020). Analysis of CAR, BOPO, NPF, FDR, NOM, and DPK on Profitability (ROA) in Islamic Banks in Indonesia. Target: Journal of Business Management, 2(1), 36–46.

Hariyani, I. (2014). Restructuring and Write-Off of Bad Debts. Jakarta: PT Elex Media Komputindo.

Harun, U. (2016). The Influence of Financial Ratios CAR, LDR, NIM, BOPO, NPL on ROA. Journal of Business and Management Research.

Hery. (2015). Introduction to Accounting. Jakarta: PT Grasindo.

Hendrastuti, R., & Harahap, RF (2023). Agency theory: Review of the theory and current research. Jurnal Akuntansi Aktual, 10(1), 85.

Hopkin, P. (2017). Fundamentals of Risk Management. Fourth Edition The Institute of Risk Management.

Ihsan, DN, & Hosen, MN (2021). Performance of BNI Syariah Bank During the Covid-19 Pandemic. Scientific Journal of Islamic Economics, 7(2), 756–770.

Indonesian Bankers Association. (2015). Identifying Market, Operational, and Credit Risks in Banks. Jakarta: Gramedia Pustaka Utama

Indonesian Bankers Association. (2016). Risk-Based Bank Health Management. Jakarta: PT. Gramedia Pustaka Utama.

Jahrotunnupus, N., & Manda, GS (2021). Analysis of the Influence of Credit Risk, Market Risk, and Operational Risk on Profitability in Commercial Banks

State-Owned Enterprises Listed on the IDX for the 2013-2020 Period. Eksis: Scientific Journal of Economics and Business, 12(2), 157.

J. Fred, W., & Brigham, E.F. (2021). Fundamentals of Financial Management (G. Hutahuruk & R. Nainggolan (eds.); 7th ed.. Erlangga

Karim, A. (2014). Islamic Bank. Jakarta: Raja Grafindo Persada. Kasmir. (2016).

Financial Statement Analysis. Jakarta: Rajawali Press. Kasmir. (2017).

Banking Management. Jakarta: Rajawali Press.

Lutz, E., & Schilling, M. A. (2023). Agency theory and strategic management: A review and future directions. Strategic Management Journal, 44(5), 1007- 1029.

Mokoagow, SW, and Misbach, F. (2015). Factors Affecting the Profitability of Islamic Commercial Banks in Indonesia. EEBANK Journal Vol 6 No 1. Mosey, AC, Tommy, P., & Untu, V. (2018). The Effect of Market Risk and Credit Risk on Profitability in State-Owned Commercial Banks Listed in

BEI Period 2012-2016. EMBA Journal: Journal of Economics, Management, Business and Accounting Research, 6(3), 1338–1347.

Mukhlisin, A., & Suhendri, A. (2018). Sharia Banking Product Development Strategy in Indonesia. Journal of Sharia Economics. Vol 3 no 2.

Muranaga, J., & Ohsawa, M. (2018). Measurement of liquidity risk in the context of market risk calculation, Working paper. Tokyo: Institute for Monetary and Economic Studies, Bank of Japan.

Natalia, P. (2017). Analysis of the Influence of Credit Risk, Market Risk, Operational Efficiency,Capital and Liquidity on Banking Financial Performance (Case Study of State-Owned Banks Listed on the IDX for the Period 2009 - 2012). Journal of Economics, Management and Banking. Journal of Economics, Management and Banking. Vol 1 No 2.

Nugraheni. Peni, et al. (2014). The Effect of Liquidity Risk on Profitability in Islamic and Conventional Banking in Indonesia. Journal of Accounting and Investment Vol 15 No 1.

Qodar, A. (2022). Influence of Non Performing Financing (NPF) On Return On Assets (ROA) In Indonesia Sharia Bank Influence of Non Performing Financing NPF) on Return On Assets (ROA). Journal Of Economics, Business And Accounting. Vol 6 No 1.

Rahmawati, A. (2020). The impact of financing risk, liquidity risk, and capital on the profitability of Islamic banking. Journal of Office Administration, 8(2), 185198.

Safei, DM (2020). The Effect of Financing Risk and Operational Risk on Profitability at Bank Bjb Syariah Tasikmalaya Branch Office. Inclusive (Journal of Islamic Economic and Legal Research Studies), 5(1), 35.

Sugiyono (2016). Quantitative, Qualitative, and R&D Research Methods. Bandung: CV Alfabeta.

Sugiyono, (2020). Qualitative Research Methods. Bandung: Alfabeta.

Sukma, N., Saerang, I., & Tulung, J. (2019). The Effect of Third Party Funds, Credit Risk, Market Risk, and Operational Risk on Profitability in Banks Category Book 2 Period 2014-2017 Effect Of Third Party Funds,

Credit Risk, Market Risk and Operational Risk on Profitability in Banks Book 2. EMBA Journal, 7(3), 2751–2760.

Tehresia, S., Mesrawati, Dewi, M., Wijaya, EY, & Billyandi, C. (2021). The Effect of Credit Risk, Liquidity Risk, Market Risk, and Operational Risk on Profitability in Banking Sector Companies. Indonesian Scientific Journal, 6(9), 4717–4730.

Trisnawati Dewi, E., & Srihandoko, W. (2018). The Effect of Credit Risk and Liquidity Risk on Bank Profitability (Case Study of State-Owned Banks 2008-2017). Journal of Financial Management, 6(3), 131–138.

Ubaidillah & Astuti, T., P,. (2020). Analysis of Islamic Bank Financial Performance Using Sharia Conformity and Profitability (SCNP). Journal of Islamic Finance and Banking Research.

Umam, K., & Utomo, S., B. (2017). Islamic banking: the basics and dynamics of its development in Indonesia. Jakarta: Rajawali Pers.

Wahyudi, I. (2014). Islamic Bank Risk Management. Jakarta: Salemba Empat

Yushinta, R., Rusdi, M., Desiana, L., Al-qardh, J., Yushinta, R., & Desiana, L. (2020). Ryan Yushinta, Muhammad Rusdi, Lidia Desiana. 5(2), 99–118.