The Impact of Bank Characteristics and Macroeconomic Variables on the Islamic Commercial Banks Financial Performances: Case of Indonesia

This study aimed to investigate the impact of banks characteristics and macroeconomic variables on the financial performance among Islamic commercial Banks in Indonesia. This study applies a quantitative research methodology, which includes a numerical measurement and analysis of the factors which influence the Islamic commercial banks financial performance. In this study both internal (banks characteristics) and external (macroeconomic variables) factors that influence the Islamic banks’ financial performance were applied; the data for this study are Panel data, also called longitudinal data or cross-sectional time-series data. It comprises of panel dataset of 12 Islamic Banks from Indonesia. Data were compiled from the DataStream Database and balance sheet for the period of 2009 to 2019, with 132 observations (nT) altogether. The results show that the internal factors (Equity Financing, Bank Size and Assets Quality) are significant factors on Islamic commercial banks financial performance in ensuring success and increase in the profitability and better performance of Islamic commercial Banks in Indonesia. On the other hand, two factor from the internal factors that has no significant impact on the Islamic commercial Banks’ financial performance in Indonesia, namely the Debt Financing and Liquidity. In addition, from the macroeconomic indicators GDP growth rate act as the main external factor that significantly have an impact on the Islamic commercial banks’ financial performance in Indonesia. Nevertheless, inflation factor has no significant impact on the Islamic commercial Bank’s financial performance in Indonesia.