Proceedings of the 5th Sriwijaya Economics, Accounting, and Business Conference (SEABC 2019)

The Nexus Between Operational Risk and Profitability in Islamic Banking

Authors
Fida Muthia, Reza Ghasarma, Sri Andaiyani, Renaldi Setiawan
Corresponding Author
Fida Muthia
Available Online 23 May 2020.
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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Volume Title
Proceedings of the 5th Sriwijaya Economics, Accounting, and Business Conference (SEABC 2019)
Series
Advances in Economics, Business and Management Research
Publication Date
23 May 2020
ISBN
978-94-6252-972-4
ISSN
2352-5428
DOI
10.2991/aebmr.k.200520.067How to use a DOI?
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/).

Cite this article

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  -