The impact of good corporate governance and Sharia compliance on the profitability of Indonesia’s Sharia banks

  • Received October 30, 2018;
    Accepted January 24, 2019;
    Published February 12, 2019
  • Author(s)
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  • Article Info
    Volume 17 2019, Issue #1, pp. 56-66
  • Cited by
    3 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

This article aimed to observe the influence of Good Corporate Governance (GCG) and Sharia compliance on the profitability of Sharia banks in Indonesia. This study uses secondary data obtained from 2012 until 2016 with nine samples of Indonesia’s Sharia banks according to purposive sampling criteria. Data are processed by using data panel regression analysis. The independent variables used are the composite value of GCG, which is the result of the self-assessment of the Sharia bank, as well as the proxy of Sharia compliance, namely Islamic Income Ratio (IsIR) and Profit Sharing Ratio (PSR), while the dependent variable used is profitability with a Return on Equity (ROE) as the proxy. The results showed that GCG and PSR variables have negative values indicating that there is no influence of GCG and PSR on ROE, while the variable of IsIR influences ROE value. This study provides benefits in presenting useful information to assess the compliance of Islamic banks based on Sharia principles.

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    • Figure 1. Relation of independent variables with dependent variables
    • Table 1. Composite value of GCG self-assessment according to Bank Indonesia
    • Table 2. Regression results using OLS model
    • Table 3. Regression results using the FE model
    • Table 4. Chow test results
    • Table 5. Regression results using RE model
    • Table 6. Hausman test results