The Nexus Between Operational Risk and Profitability in Islamic Banking

DOI

10.2991/aebmr.k.200520.067How to use a DOI?

Keywords

operational risk, profitability, panel data, cost to income ratio, cost to total asset ratio

Abstract

This paper aims to demonstrate the effect of operational risk on profitability in Islamic banks. The total of 14 Islamic banks in Indonesia for the period of 2016-2018 are selected to be the sample of this study. Operational risk is measured using cost to income ratio and cost to total asset ratio, meanwhile profitability is calculated by return on average asset and return on average equity. Bank’s size, which is measured by log of total asset, is used as the control variable in this study. The findings show that the appropriate model in this study is Pooled OLS model and operational risk, which is measured by cost to total asset, is found to be positively related to profitability. This shows that the higher operational cost incurs by Islamic bank, the better the management of their risk.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Fida Muthia
AU  - Reza Ghasarma
AU  - Sri Andaiyani
AU  - Renaldi Setiawan
PY  - 2020
DA  - 2020/05/23
TI  - The Nexus Between Operational Risk and Profitability in Islamic Banking
BT  - Proceedings of the 5th Sriwijaya Economics, Accounting, and Business Conference (SEABC 2019)
PB  - Atlantis Press
SP  - 407
EP  - 411
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.200520.067
DO  - 10.2991/aebmr.k.200520.067
ID  - Muthia2020
ER  -