Determinants of Islamic Banking Profitability
نویسنده
چکیده
The paper analyzes how bank characteristics and the overall financial environment affect the performance of Islamic banks. Utilizing bank level data, the study examines the performance indicators of Islamic banks’ worldwide during 1994-2001. A variety of internal and external banking characteristics were used to predict profitability and efficiency. In general, our analysis of determinants of Islamic bank profitability confirms previous findings. Controlling for macroeconomic environment, financial market structure, and taxation, the results indicate that high capital and loan-to-asset ratios lead to higher profitability. Everything remaining equal, the regression results show that implicit and explicit taxes affect the bank performance measures negatively while favorable macroeconomic conditions impact performance measures positively. Surprisingly, the results indicate a strong positive correlation between profitability and overhead.
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