The Relationship Between Capital Structure and Performance in Islamic Rural Bank
DOI:
https://doi.org/10.26555/ijish.v3i2.1989Keywords:
Capital Structure, Islamic Rural Banks (BPRS), Performance, IndonesiaAbstract
The source of Islamic banking capital must avoid interest as the vision and mission that relies on al-Quran and hadith. The capital structure is important for financial institutions, including Sharia Rural Bank (BPRS). However, BPRS has a problem that is the limited capital owned so that it affects performance. This paper's main objective is to investigate the relationship between capital structure and performance of the Islamic Rural Banks (BPRS) in Indonesia. The study using panel data regression to measure the capital structure on performance. The research sample used 164 BPRS that operate in 33 provinces from 2010 until 2017. The results show that capital structure affects DER (debt to equity ratio) and DAR (debt to asset ratio) but negatively affects ETA (equity to total Asset ratio). These findings indicate an increase in the capital structure of the performance of the BPRS in Indonesia. Hence, bank managers must reach a trade-off between the advantages and disadvantages of creating liquidity and consider the negative relationship between liquidity creation and bank performance when making decisions.References
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Belanès, A. (2015). Islamic versus conventional banks : a comparative analysis on capital structure. Afro-Asian J. Finance and Accounting, 5(3), 248–264, DOI: 10.1504/AAJFA.2015.070292.
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Jouida, S., & Hallara, S. (2015). Capital Structure and Regulatory Capital of French Banks. Procedia Economics and Finance, 26(15), 892–902, DOI: 10.1016/S2212-5671(15)00901-6.
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Mariam Nanden S, I. dan T. (2017). The impact of debt financing and equity financing on profit expense ratio of Islamic banks in Indonesia Nenden Siti Mariam 1 , Isnurhadi 2 , & Taufik 3. Jembatan - Jurnal Ilmiah Manajemen Bisnis Dan Terapan, (2), 59–68, available at Google Scholar.
Modigliani, F., & Miller, M. H. (1963). American Economic Association Corporate Income Taxes and the Cost of Capital : A Correction. The American Economic Review, 53(3), 433–443, available at Google Scholar.
Muhamad Nadratuzzaman Hosen & Muhari Syafaat. (2019). Non-performing financing of Islamic rural bank industry in Indonesia. Banks and Bank Systems, 14(1), 20–28, DOI: 10.21511/bbs.14(1).2019.03.
Muhamad Nadratuzzaman Hosen & Sabrina Fitria. (2018). The Performance of Islamic Rural Banks in Indonesia : 2010-2015. European Research Studies Journal, XXI(3), 2018, available at Google Scholar.
Nafik, M., Ryandono, H., & Wahyudi, R. (2018). Manajemen Bank Islam: Pendekatan Syariah dan Praktik. Yogyakarta: UAD Press, available at Google Scholar.
Nikoo, S. F. (2013). Impact of capital structure on firm value: Evidence from Tehran Stock Exchange. Management Science Letters, 3(6), 1535–1538, DOI: 10.5267/j.msl.2013.05.040.
OJK. (2019). Statistik Perbankan Syriah. In Departemen Perizinan dan Informasi Perbankan Otoritas Jasa Keuangan, available at: ojk.go.id.
Putra Pratama, A. A. (2019). Does asset quality matter the relationship between bank capital on lending growth? International Journal of Management, 10(5), 38–47, available at Google Scholar.
Raghib Zafar, M., Zeeshan, F., & Ahmed, R. (2016). Impact of Capital Structure on Banking Profitability. International Journal of Scientific and Research Publications, 6(3), 186–193, available at Google Scholar.
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Rofiul Wahyudi, Riduwan, S. M. (2019). Debt and Equity-Based Financing, Size and Islamic Banks Profitability : Empirical Evidence. Iqtishadia, 2(2), available at Google Scholar.
Sahyouni, A., & Wang, M. (2019). Liquidity creation and bank performance : evidence from MENA. ISRA International Journal of Islamic Finance, 11(1), 27–45, DOI: 10.1108/IJIF-01-2018-0009.
Sheikh, N. A., & Qureshi, M. A. (2017). Determinants of the capital structure of Islamic and conventional commercial banks: Evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(1), 24–41, DOI: 10.1108/IMEFM-10-2015-0119.
Stewart C. MYERS. (1984). Corporate financing and investment decisions when firms have information that investors do not have*. Journal of Financial Economics, 13, 187–221, available at Google Scholar.
Trinugroho, I., Risfandy, T., & Doddy, M. (2018). Borsa _ Istanbul Review Competition, diversification, and bank margins : Evidence from Indonesian Islamic rural banks. Borsa Istanbul Review, 18(4), 349–358, DOI: 10.1016/j.bir.2018.07.006.
Wahyudi, R., Pambudi, D., & Adha, M. (2019, November). Islamic Banking Microprudential and Macroprudential Policy: Evidence Of Indonesian Islamic Banking. In 2019 Ahmad Dahlan International Conference Series on Education & Learning, Social Science & Humanities (ADICS-ELSSH 2019). Atlantis Press, DOI: 10.2991/adics-elssh-19.2019.22.
Widiarjono, A. (2007). Ekonometrika Teori dan Aplikasi Untuk Ekonomi dan Bisnis (Ekonisia F). Yogyakarta, available at Google Scholar.
Hasan, Z. (2020). Leading Issues in Islamic Economics and Finance. Springer Books, available at Google Scholar.
Akhtar, N., Bano, M., Bano, S., Zia, H. T., & Jameel, N. (2016). Capital {Structure} {Impact} on {Banking} {Sector} {Performance} in {Pakistan}. International Review of Management and Business Research, 5(2), 519, available at Google Scholar.
Al-deehani, T., Ahmed, R., & Karim, A. (1999). The capital structure of islamic banks under the contractual obligation of profit sharing. International Journal of Theoretical and Applied Financa, 2(3), 243–283, DOI: 10.1142/S0219024999000157.
Al-Farisi, A. S., & Hendrawan, R. (2011). Effect of Capital Structure on Banks Performance: A Profit Efficiency Approach Islamic and Conventional Banks Case in Indonesia. Ssrn, (47), DOI: 10.2139/ssrn.1895211.
Alharbi, A. (2015). Development of the Islamic Banking System. Journal of Islamic Banking and Finance, 3(1), 12–25, DOI: 10.15640/jibf.v3n1a2.
Amanda Maulidiyah Firdaus dan Ari Prasetyo. (2017). Pengaruh debt financing dan equity financing terhadap profit expense ratio perbankan umum syariah periode 2011-2015. Jurnal Ekonomi Syariah Teori Dan Terapan, 4(6), 506–514, doi: 10.1017/CBO9781107415324.004.
Archer, S., & Karim, R. A. A. (2006). On Capital Structure, Risk Sharing and Capital Adequacy in Islamic Banking. International Journal of Theoretical & Applied Finance, 9(3), 269–280, DOI: 10.1142/S0219024906003627.
Belanès, A. (2015). Islamic versus conventional banks : a comparative analysis on capital structure. Afro-Asian J. Finance and Accounting, 5(3), 248–264, DOI: 10.1504/AAJFA.2015.070292.
Chowdhury, M. A. F., Akbar, C. S., & Shoyeb, M. (2018). Nexus between risk sharing vs non-risk sharing financing and economic growth of Bangladesh. Managerial Finance, 44(6), 739–758, DOI: 10.1108/MF-12-2016-0371.
Dieter, H., & Seibel, H. D. (2016). Supervision Research Notes and Comments Islamic Microfinance in Indonesia : The Challenge of Institutional Diversity , Regulation , and Supervision. 23(1), 86–103, available at Google Scholar.
Ding, D., & Sickles, R. C. (2018). Frontier efficiency, capital structure, and portfolio risk: An empirical analysis of U.S. banks. BRQ Business Research Quarterly, 21(4), 262–277. DOI: 10.1016/j.brq.2018.09.002.
Duasa, J., Raihan Syed Mohd Zain, S., & Tarek Al-Kayed, L. (2014). The relationship between capital structure and performance of Islamic banks. Journal of Islamic Accounting and Business Research, 5(2), 158–181, DOI: 10.1108/JIABR-04-2012-0024.
Fernández-Méndez, C., & González, V. M. (2019). Bank ownership, lending relationships and capital structure: Evidence from Spain. BRQ Business Research Quarterly, 22(2), 137–154, doi: 10.1016/j.brq.2018.05.002.
Gujarati, D. (2003). Ekonometri Dasar (Terjemahan; Erlangga, Ed.). Jakarta, available at Google Scholar.
Hardianto, D. S., & Wulandari, P. (2016). Islamic bank vs conventional bank: intermediation, fee based service activity and efficiency. International Journal of Islamic and Middle Eastern Finance and Management, 9(2), 296–311, DOI: 10.1108/IMEFM-01-2015-0003.
Jouida, S., & Hallara, S. (2015). Capital Structure and Regulatory Capital of French Banks. Procedia Economics and Finance, 26(15), 892–902, DOI: 10.1016/S2212-5671(15)00901-6.
Karim, N., Tarazi, M., & Reille, X. (2008). Islamic Microfinance: An Emerging Market Niche. (March), available at Google Scholar.
Latifah, U. L. dan R. (2018). Pengaruh Debt Financing dan Equity Financing Terhadap Return On Equity (ROE) Pada PT. Bank Jabar Banten Syariah, available at Google Scholar.
M. Dawan Rahardjo. (2015). Arsitektur Ekonomi Islam. Jakarta: Mizan, available at Google Scholar.
M.Moshin Hafeez, H. H. K. F. M. A. A. (2018). Impact of Capital Structure on Islamic Banks Performance: (Evidence from Asian country). Global Journal of Management And Business Research, 18(3), available at Google Scholar.
Mariam Nanden S, I. dan T. (2017). The impact of debt financing and equity financing on profit expense ratio of Islamic banks in Indonesia Nenden Siti Mariam 1 , Isnurhadi 2 , & Taufik 3. Jembatan - Jurnal Ilmiah Manajemen Bisnis Dan Terapan, (2), 59–68, available at Google Scholar.
Modigliani, F., & Miller, M. H. (1963). American Economic Association Corporate Income Taxes and the Cost of Capital : A Correction. The American Economic Review, 53(3), 433–443, available at Google Scholar.
Muhamad Nadratuzzaman Hosen & Muhari Syafaat. (2019). Non-performing financing of Islamic rural bank industry in Indonesia. Banks and Bank Systems, 14(1), 20–28, DOI: 10.21511/bbs.14(1).2019.03.
Muhamad Nadratuzzaman Hosen & Sabrina Fitria. (2018). The Performance of Islamic Rural Banks in Indonesia : 2010-2015. European Research Studies Journal, XXI(3), 2018, available at Google Scholar.
Nafik, M., Ryandono, H., & Wahyudi, R. (2018). Manajemen Bank Islam: Pendekatan Syariah dan Praktik. Yogyakarta: UAD Press, available at Google Scholar.
Nikoo, S. F. (2013). Impact of capital structure on firm value: Evidence from Tehran Stock Exchange. Management Science Letters, 3(6), 1535–1538, DOI: 10.5267/j.msl.2013.05.040.
OJK. (2019). Statistik Perbankan Syriah. In Departemen Perizinan dan Informasi Perbankan Otoritas Jasa Keuangan, available at: ojk.go.id.
Putra Pratama, A. A. (2019). Does asset quality matter the relationship between bank capital on lending growth? International Journal of Management, 10(5), 38–47, available at Google Scholar.
Raghib Zafar, M., Zeeshan, F., & Ahmed, R. (2016). Impact of Capital Structure on Banking Profitability. International Journal of Scientific and Research Publications, 6(3), 186–193, available at Google Scholar.
Reuters, I. (2017). ISLAMIC FINANCE DEVELOPMENT report 2017 Towards Sustainability, available at Google Scholar.
Rofiul Wahyudi, Riduwan, S. M. (2019). Debt and Equity-Based Financing, Size and Islamic Banks Profitability : Empirical Evidence. Iqtishadia, 2(2), available at Google Scholar.
Sahyouni, A., & Wang, M. (2019). Liquidity creation and bank performance : evidence from MENA. ISRA International Journal of Islamic Finance, 11(1), 27–45, DOI: 10.1108/IJIF-01-2018-0009.
Sheikh, N. A., & Qureshi, M. A. (2017). Determinants of the capital structure of Islamic and conventional commercial banks: Evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(1), 24–41, DOI: 10.1108/IMEFM-10-2015-0119.
Stewart C. MYERS. (1984). Corporate financing and investment decisions when firms have information that investors do not have*. Journal of Financial Economics, 13, 187–221, available at Google Scholar.
Trinugroho, I., Risfandy, T., & Doddy, M. (2018). Borsa _ Istanbul Review Competition, diversification, and bank margins : Evidence from Indonesian Islamic rural banks. Borsa Istanbul Review, 18(4), 349–358, DOI: 10.1016/j.bir.2018.07.006.
Wahyudi, R., Pambudi, D., & Adha, M. (2019, November). Islamic Banking Microprudential and Macroprudential Policy: Evidence Of Indonesian Islamic Banking. In 2019 Ahmad Dahlan International Conference Series on Education & Learning, Social Science & Humanities (ADICS-ELSSH 2019). Atlantis Press, DOI: 10.2991/adics-elssh-19.2019.22.
Widiarjono, A. (2007). Ekonometrika Teori dan Aplikasi Untuk Ekonomi dan Bisnis (Ekonisia F). Yogyakarta, available at Google Scholar.
Hasan, Z. (2020). Leading Issues in Islamic Economics and Finance. Springer Books, available at Google Scholar.
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2020-10-21
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Wahyudi, R., Fithria, A., & Wardiwiyono, S. (2020). The Relationship Between Capital Structure and Performance in Islamic Rural Bank. IJISH (International Journal of Islamic Studies and Humanities), 3(2), 82–89. https://doi.org/10.26555/ijish.v3i2.1989
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