Determinates of Islamic Banking Profitability: An Evidence from Gulf Cooperation Council (GCC) (2011–2014)
American J. Finance and Accounting, Vol. 5, No. 1, 2017
Posted: 27 May 2020
Date Written: April 12, 2017
Abstract
Islamic banking is attracting the attention of the economic and finance people alike. This paper analyses micro models, micro and macro models of Islamic banking profitability in Gulf Cooperation Council (GCC) during 2011–2014. The results show that overheads divided by total assets (OVRHD) negatively affect profitability whether at micro level model or micro and macro level model. In addition, annual growth rate of real gross domestic product per capita (GDPPC) positively affect profitability represented by ROA at the micro and macro model. While the ratio of non-interest earning assets divided by total asset (NIEATA) negatively affect profitability represented by ROE at the micro and macro model. Finally, there is no effect of the other variables on the profitability in the four models. As a continuation of this study, further research should be carried out using other Islamic demographic determinants as the adjusted R-square in our model is low.
Keywords: Islamic banking; GCC; Gulf Cooperation Council; ROA; return on assets; ROE; return on equity
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