Open AccessThe Effect Of Debt-Based Financing And Equity-Based Financing On Islamic Banks Profitability In Indonesia
Author(s) -
Rofiul Wahyudi,
Aulia Arifatu Diniyya,
Julia Noermawati Eka Satyarini,
Lu’liyatul Mutmainah,
Sri Maulida
Publication year - 2020
Publication title -
international journal of islamic business and economics (ijibec)
Language(s) - English
Resource type - Journals
eISSN - 2615-420X
pISSN - 2599-3216
DOI - 10.28918/ijibec.v4i2.2771
Subject(s) - profitability index , panel data , finance , islam , business , debt , gearing ratio , equity (law) , return on equity , debt to equity ratio , financial system , economics , equity ratio , econometrics , population , philosophy , demography , theology , sociology , political science , law , nonprobability sampling
This study's main objective is to investigate equity-based financing and debt-based financing of the profitability of Islamic banking in Indonesia. This research is expected to contribute to the theoretical and practical dimensions. On the conceptual aspect, this study can provide evidence of whether equity-based financing and debt-based financing affect the profitability of Islamic banking. While on the practical dimension, Islamic banks in Indonesia can determine the extent of their profitability and, in turn, the competitiveness of Islamic banks to enable it to be developed in line or even better than conventional banks. The data analysis technique uses panel data regression, which is time series data and cross-section. Next, to estimate the panel data model, which is divided into three, namely: common effect, fixed effect, and random effect. The result of this study that partially equity-based financing does not affect ROE. At the same time, debt-based financing influences the ROE of Islamic banks. Partially equity-based financing and debt-based financing do not affect ROA of Islamic banks. However, it simultaneously shows that the independent variable test results, namely equity-based financing and debt-based financing, have a strong influence on the dependent variable, namely, profitability as measured by ROA and ROE.