Comparative Effects of Profitability and Risk Management on Financial Stability in A Dual Banking System: Does Yield Matter?
Downloads
This study aims to examine the impact of risk management and profitability on the stability of conventional and Islamic commercial banks in Indonesia and to assess whether yield can moderate this effect. The research analyzes data from Indonesian Sharia and conventional commercial banks from 2016 to 2023 using fixed-effects panel data regression with robust standard errors. The findings reveal that Sharia banks exhibit greater risk resilience than conventional banks, demonstrating a lower probability of instability. Additionally, yield enhances the effect of non-performing financing (NPF) on bank stability in Sharia banks and mitigates the impact of non-performing loans (NPL) in conventional banks. These results offer valuable insights for policymakers and contribute to the literature by highlighting the need for a balanced approach to ensure that bank profitability enhances stability rather than undermines it. It underscores that higher profits are not inherently beneficial, nor are lower profits necessarily detrimental. Banks must strike a balance, maintain public trust, and promote prudent risk management to achieve long-term stability.
Abuzayed, B., Al-Fayoumi, N., & Molyneux, P. (2018). Diversification and bank stability in the GCC. Journal of International Financial Markets, Institutions and Money, 57, 17–43. https://doi.org/10.1016/j.intfin.2018.04.005
Acharya, V., & Naqvi, H. (2012). The seeds of a crisis: A theory of bank liquidity and risk-taking over the business cycle. Journal of Financial Economics, 106(2), 349–366. https://doi.org/10.1016/j.jfineco.2012.05.014
Agustina, C. M., Manurung, A. H., & Manurung, A. (2023). Factors that Affect Bank Risk in Commercial Banks that Are Publicly Listed. Journal of Applied Finance & Banking, 13(3), 19-40.
Ahmad, S., Wan Ahmad, W. M., & Shaharuddin, S. S. (2022). Is excess of everything bad? Ramifications of excess liquidity on bank stability: Evidence from the dual banking system. Borsa Istanbul Review, 22, S92–S107. https://doi.org/10.1016/j.bir.2022.09.008
Al-Harbi, A. (2017). Determinants of banks liquidity: Evidence from OIC countries. Journal of Economic and Administrative Sciences, 33(2), 164–177. https://doi.org/10.1108/JEAS-02-2017-0004
Ali, M., Sohail, A., Khan, L., & Puah, C.-H. (2019). Exploring the role of risk and corruption on bank stability: Evidence from Pakistan. Journal of Money Laundering Control, 22(2), 270–288. https://doi.org/10.1108/JMLC-03-2018-0019
Badea, I. R., & Matei, G. (2016). The Z-Score Model for Predicting Periods of Financial Instability. Z - Score Estimation for the Banks Listed on Bucharest Stock Exchange. Finance : Challenges of the Future, 1(18), 24–35.
Ben Jedidia, K., & Salah, I. B. (2022). Asymmetric Causal Linkages Between Liquidity And Profitability For Mena Islamic Banks. Journal of Islamic Monetary Economics and Finance, 8(4), 501–516. https://doi.org/10.21098/jimf.v8i4.1546
Ben Salah Mahdi, I., & Boujelbene Abbes, M. (2018). Relationship between capital, risk and liquidity: A comparative study between Islamic and conventional banks in MENA region. Research in International Business and Finance, 45, 588–596. https://doi.org/10.1016/j.ribaf.2017.07.113
Bossone, B. (2001). Do banks have a future?: A study on banking and finance as we move into the third millennium. Journal of Banking and Finance, 25(12), 2239–2276. https://doi.org/10.1016/S0378-4266(01)00196-0
Chakravarty, S., & Rutherford, L. G. (2017). Do busy directors influence the cost of debt? An examination through the lens of takeover vulnerability. Journal of Corporate Finance, 43, 429–443. https://doi.org/10.1016/j.jcorpfin.2017.02.001
Dangnga, M. T., & Haeruddin, M. (2018). Kinerja keuangan perbankan: Upaya untuk menciptakan sistem perbankan yang sehat. Pustaka Taman Ilmu & CV Nur Lina
Djuitaningsih, T. (2020). Quo Vadis, Islamic Banking? Literature Study on Islamic Commercial Banks and Sharia Business Units in Indonesia. Journal of Management and Strategy, 11(4), 47-58. https://doi.org/10.5430/jms.v11n4p47
Drucker, S., & Puri, M. (2009). On Loan Sales, Loan Contracting, and Lending Relationships. The Review of Financial Studies, 22(7), 2835–2872. https://doi.org/10.1093/rfs/hhn067
Dwinanda, I. Z., & Sulistyowati, C. (2021). The Effect of Credit Risk and Liquidity Risk on Bank Stability. Jurnal Ilmu Ekonomi Terapan, 6(2), 255–266. https://doi.org/10.20473/jiet.v6i2.31144
Ghenimi, A., Chaibi, H., & Omri, M. A. B. (2017). The effects of liquidity risk and credit risk on bank stability: Evidence from the MENA region. Borsa Istanbul Review, 17(4), 238–248. https://doi.org/10.1016/j.bir.2017.05.002
Ertürk, M., & Yüksel, S. (2013). Casual link between Islamic and conventional banking: evidence from Turkish banking sector.Research Department of Borsa Istanbul Working Paper Series, 6, 1-20.
Hamza, H. (2018). What Drives Islamic Banks Profitability in the Gulf Cooperation Council Countries? Turkish Journal of Islamic Economics. 10(1), 19-38.
Hapsari, P. N., & Widarjono, A. (2023). Diversifikasi pembiayaan dan pengaruh Covid-19 terhadap Non Performing Financing (NPF) di Provinsi Jawa Barat Indonesia. Jurnal Kebijakan Ekonomi Dan Keuangan, 2(1), 36–49.
Hasriadi, L. O., Marwansyah, M., & Syarief, M. (2022). The Influence of the Capital Adequacy Ratio, Net Interest Margin, Gross Domestic Product and Inflation on the Profitability of Islamic Banks in the Middle of the Pandemic Covid-19. Proceedings of the 4th International Conference on Economics, Business and Economic Education Science, ICE-BEES 2021, 27-28 July 2021, Semarang, Indonesia, Semarang, Indonesia. https://doi.org/10.4108/eai.27-7-2021.2316929
Ismail, S., & Ahmed, E. (2023). The impact of liquidity risk, credit risk, and operational risk on financial stability in conventional banks in Jordan. Uncertain Supply Chain Management, 11(2), 433-442.
Kabir, Md. N., Worthington, A., & Gupta, R. (2015). Comparative credit risk in Islamic and conventional bank. Pacific-Basin Finance Journal, 34, 327–353. https://doi.org/10.1016/j.pacfin.2015.06.001
Katz, J. T. (2023). Saussure At Play And His Structuralist And Post-Structuralist Interpreters.
Ketaren, E. V., & Haryanto, A. M. (2020). Pengaruh Kinerja Keuangan terhadap Stabilitas Perbankan yang Terdaftar Di Bursa Efek Indonesia (Studi Kasus pada Bank yang Terdaftar di BEI Tahun 2014-2018). Diponegoro Journal of Management, 9(2), 1-13.
Khan, M., & Hussain, M. (2020). Impact Of Islamic Financial Products On Financial Stability In Islamic Banks. International Journal of Management and Applied Science, 6(2), 47-56.
Khomsatun, S., Rossietab, H., & Nasution, M. E. (2020). The impact of the Sharia Supervisory Board on Islamic Bank soundness: Does political system matter? International Journal of Innovation, Creativity and Change, 12(4), 208–228.
Kurniawati, A., & Indriyani, S. N. (2022). Pengaruh Loan To Deposit Ratio, Net Interest Margin Dan Nonperforming Loan Terhadap Stabilitas Sistem Keuangan Perbankan Di Indonesia. Jurnal Manajemen Bisnis Krisnadwipayana, 10(1), 480-492. https://doi.org/10.35137/jmbk.v10i1.676
Lee, S. P., Isa, M., & Auzairy, N. A. (2020). The relationships between time deposit rates, real rates, inflation and risk premium: The case of a dual banking system in Malaysia. Journal of Islamic Accounting and Business Research, 11(5), 1033-1053.
Mala, C. M. F., Rodoni, A., & Yaman, B. (2018). Market Power And Efficiency Of Islamic Banking And Conventional Banking In Indonesia. Global Review of Islamic Economics and Business, 6(2), 131-143. https://doi.org/10.14421/grieb.2018.062-05
Mateev, M., Moudud-Ul-Huq, S., Sahyouni, A., & Tariq, M. U. (2022). Capital regulation, competition and risk-taking: Policy implications for banking sector stability in the MENA region. Research in International Business and Finance, 60, 101579. https://doi.org/10.1016/j.ribaf.2021.101579
Maulana, I., Widarwati, E., Nurmalasari, N., & Wityasminigsih, E. (2023). The impact of Income Diversification on Performance and Risk Taking: Case in Indonesia’s Shariah Banking during covid-19. TSARWATICA (Islamic Economic, Accounting, and Management Journal), 4(2), 29–38.
Moreno, I., Parrado-Martínez, P., & Trujillo-Ponce, A. (2022). Using the Z-score to analyze the financial soundness of insurance firms. European Journal of Management and Business Economics, 31(1), 22–39. https://doi.org/10.1108/EJMBE-09-2020-0261
Myers, S. C. (1984). The Capital Structure Puzzle. The Journal of Finance, 39(3), 574-592. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x
Nguyen, M., Skully, M., & Perera, S. (2012). Market power, revenue diversification and bank stability: Evidence from selected South Asian countries. Journal of International Financial Markets, Institutions and Money, 22(4), 897–912. https://doi.org/10.1016/j.intfin.2012.05.008
Nosheen, & Rashid, A. (2021). Financial soundness of single versus dual banking system: Explaining the role of Islamic banks. Portuguese Economic Journal, 20(1), 99–127. https://doi.org/10.1007/s10258-019-00171-2
Nugroho, L., & Anisa, N. (2018). Pengaruh Manajemen Bank Induk, Kualitas Aset, Dan Efisiensi Terhadap Stabilitas Bank Syariah Di Indonesia (Periode Tahun 2013-2017). Inovbiz: Jurnal Inovasi Bisnis, 6(2), 114-122. https://doi.org/10.35314/inovbiz.v6i2.833
Paltrinieri, A., Dreassi, A., Rossi, S., & Khan, A. (2021). Risk-adjusted profitability and stability of Islamic and conventional banks: Does revenue diversification matter? Global Finance Journal, 50, 100517. https://doi.org/10.1016/j.gfj.2020.100517
Pambuko, Z. B., Ichsan, N., & Anto, Mb. H. (2018). Islamic Banks’ Financial Stability and Its Determinants: A Comparison Study With Conventional Banks in Indonesia. IQTISHADIA, 11(2), 371-390. https://doi.org/10.21043/iqtishadia.v11i2.3346
Putri, C. V., & Syafruddin, M. (2023). Pengaruh Manajemen Risiko Terhadap Kinerja Keuangan Bank (Studi Empiris pada Perusahaan Sektor Keuangan Sub Sektor Bank yang Terdaftar di BEI Tahun 2010–2019). Diponegoro Journal of Accounting, 12(2). 1-14
Rifai, A. B. A. (2020). Analisis Risiko Imbal Hasil Pada Bank Syariah. Al-Infaq: Jurnal Ekonomi Islam, 11(2), 226-234. https://doi.org/10.32507/ajei.v11i2.664
Rizvi, S. A. R., Narayan, P. K., Sakti, A., & Syarifuddin, F. (2020). Role of Islamic banks in Indonesian banking industry: an empirical exploration. Pacific Basin Finance Journal, 62, 101117. https://doi.org/10.1016/j.pacfin.2019.02.002
Santomero, A. M. (1997). Commercial bank risk management: an analysis of the process. Journal of Financial Services Research, 12, 83-115.
Sepriani, L., & Candy. (2022). The Effect of Corporate Governance on Corporate Value: The Role of Enterprise Risk Management. Matrik : Jurnal Manajemen, Strategi Bisnis Dan Kewirausahaan, 16(2), 224. https://doi.org/10.24843/matrik:jmbk.2022.v16.i02.p04
Yurida, S. S., & Harahap, R. D. (2023). Pengaruh Liquidity Risk dan Credit Risk terhadap Stabilitas Bank dengan Operational Efficiency sebagai Variabel Intervening pada Bank Umum Syariah di Indonesia. Jurnal Masharif Al-Syariah: Jurnal Ekonomi Dan Perbankan Syariah, 8(3), 605-624. https://doi.org/10.30651/jms.v8i3.20787
Sutrisno, B. (2023). Studi Komparatif Tingkat Profitabilitas Perbankan Syariah dan Konvensional di Indonesia selama Pandemi COVID-19. Taraadin : Jurnal Ekonomi dan Bisnis Islam, 3(2), 69-76.
Syafitri, D., & Batubara, C. (2023). Evaluasi Strategi Investasi Bank Syariah dalam Menghadapi Volatilitas Pasar Keuangan. JIKEM: Jurnal Ilmu Komputer, Ekonomi Dan Manajemen, 3(2), 3565–3576.
Synatrya, U. N., & Pramono, N. H. (2022). Anlysis of The Impact of Covid-19 on Non Performing Financing Digital Banking and Fintech on The Profitability of Sharia and Conventional Banks With Macro Economy as Moderation. Iqtishadia, 15(2), 215–254.
Thornton, J., & Di Tommaso, C. (2021). The effect of non‐performing loans on credit expansion: Do capital and profitability matter? Evidence from European banks. International Journal of Finance & Economics, 26(3), 4822–4839.
Trinh, V. Q., Aljughaiman, A. A., & Cao, N. D. (2020). Fetching better deals from creditors: Board busyness, agency relationships and the bank cost of debt. International Review of Financial Analysis, 69, 101472. https://doi.org/10.1016/j.irfa.2020.101472
Widagdo, A. K., & Ika, S. R. (2009). The Interest Prohibition and Financial Performance of Islamic Banks: Indonesian Evidence. International Business Research, 1(3), 98–109. https://doi.org/10.5539/ibr.v1n3p98
Wijaya, O. Y. A. (2021). Risk Management Mitigation in the New Normal Era. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 4(1), 1088-1097.
Copyright (c) 2024 M. Yusril Hafidz Nur Izza, Amila Zamzabila Putri
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
JIET (Jurnal Ilmu Ekonomi Terapan) (p-ISSN: 2541-1470; e-ISSN: 2528-1879) is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License
Authors who publish with JIET (Jurnal Ilmu Ekonomi Terapan) agree to the following terms:
- The journal allows the author to hold the copyright of the article without restrictions.
- The journal allows the author(s) to retain publishing rights without restrictions
- The legal formal aspect of journal publication accessibility refers to Creative Commons Attribution ShareAlike 4.0 International License (CC BY-SA).
