Open AccessTHE IMPACT OF RISK AND REPUTATION ON FINANCIAL PERFORMANCE IN ISLAMIC BANKING: EVIDANCE FROM INDONESIA
Author(s) -
Falikhatun Falikhatun,
Mutiarafah Mutiarafah
Publication year - 2021
Publication title -
amwaluna
Language(s) - English
Resource type - Journals
eISSN - 2540-8402
pISSN - 2540-8399
DOI - 10.29313/amwaluna.v5i2.7033
Subject(s) - reputation , business , market liquidity , islamic banking , finance , liquidity risk , profit (economics) , islam , financial system , economics , social science , philosophy , theology , sociology , microeconomics
This study aims to examine the impact of risk and reputation on financial performance. More specifically, we use financing risk, liquidity risk, reputation with rewards, and growth in profit-sharing based financing as our variable of interests. We also assign bank size as a control variable. Our data is analyzed using Generalized Least Square (GLS) regression. Islamic Commercial Banks listed in Sharia Banking Statistics (Statistik Perbankan Syariah - SPS) published by OJK in 2015−2019 are selected as our sample. We find that (1) financing risk has a negative effect on financial performance; and (2) both reputation with rewards and bank size have a positive effect on financial performance. However, liquidity risk and growth in profit-sharing based financing do not affect financial performance. Several research implications are the importance of risk mitigation, the importance to maintain the reputation of the Islamic bank’s stakeholders, and creating innovative funding and financing products.