THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA

As a higher net profit margin (NPM) is typically connected to higher financing and lower deposit rates, the NPM level established by Islamic banks [following the maslahah (benefit) element] should protect the benefits of banks, borrowers, and depositors. As such, this research investigated the NP...

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Main Author:	MAISYARAH BINTI STAPAH @ SALLEH
Format:	Thesis
Language:	English
Subjects:	Islamic banks financing HG 3368 .A6 M32 2021
Online Access:	http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/1/HG%203368%20.A6%20M32%202021-%20Extract.pdf http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/2/HG%203368%20.A6%20M32%202021-%20Full%20Text.pdf
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id	my-umt-ir.-17428
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spelling	my-umt-ir.-174282022-09-04T13:48:44Z THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA MAISYARAH BINTI STAPAH @ SALLEH As a higher net profit margin (NPM) is typically connected to higher financing and lower deposit rates, the NPM level established by Islamic banks [following the maslahah (benefit) element] should protect the benefits of banks, borrowers, and depositors. As such, this research investigated the NPM determinants in Malaysian Islamic banking between 2008 and 2017. Resultantly, the Malaysian Islamic bank NPM was positively associated with bank-specific variables (risk aversion or RA, operating cost or OC, and liquidity or LQ). On another note, saving deposit or SAV, fixed deposit or FD, gross domestic product growth or GDP Growth, and inflation or INF adversely influenced NPM. Additionally, the effect of several financing contracts on NPM revealed that only the bai bithaman ajil (BBA) financing contract was substantially connected to NPM. The second research objective implied that the net interest margin (NIM) of conventional parent banks proved insignificant to the Islamic bank NPM. Objectives 1 and 2 were assessed with static panel data, while the remaining objectives were evaluated using either an independent t-test or the Mann Whitney test. As for objective 3, a difference was identified in the NPM charged by Islamic subsidiary and full-fledged Islamic banks where Islamic subsidiary banks imposed lower NPM (on average) than the full-fledged counterparts. Regarding objective 4, a difference was identified in the NPM charged by foreign Islamic and domestic Islamic banks where foreign Islamic banks imposed a higher (on average) NPM than domestic Islamic counterparts. Summarily, the variables affecting NPM need to be controlled by the Islamic banks in order to attain the maslahah (benefit) of all parties. Bank-specific variables also contributed to the NPM differences offered by the subsidiary, full-fledged, domestic, and foreign Islamic banks. In this vein, Islamic banks needed to develop NPM from an Islamic viewpoint based on the fundamental theory (Contract Theory or CT). This research also outlined how the variables originated from a combination of several theories facilitating the current NPM theory. Universiti Malaysia Terengganu 2021 Thesis en http://umt-ir.umt.edu.my:8080/handle/123456789/17428 http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/1/HG%203368%20.A6%20M32%202021-%20Extract.pdf 5bafa727dcf0c94e68448f3e5bd23812 http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/2/HG%203368%20.A6%20M32%202021-%20Full%20Text.pdf a3334cb7197d04f572b83a964aebd99b http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/3/license.txt 8a4605be74aa9ea9d79846c1fba20a33 Islamic banks financing HG 3368 .A6 M32 2021
institution	Universiti Malaysia Terengganu
collection	UMT Repository System
language	English
topic	Islamic banks financing HG 3368 .A6 M32 2021
spellingShingle	Islamic banks financing HG 3368 .A6 M32 2021 MAISYARAH BINTI STAPAH @ SALLEH THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA
description	As a higher net profit margin (NPM) is typically connected to higher financing and lower deposit rates, the NPM level established by Islamic banks [following the maslahah (benefit) element] should protect the benefits of banks, borrowers, and depositors. As such, this research investigated the NPM determinants in Malaysian Islamic banking between 2008 and 2017. Resultantly, the Malaysian Islamic bank NPM was positively associated with bank-specific variables (risk aversion or RA, operating cost or OC, and liquidity or LQ). On another note, saving deposit or SAV, fixed deposit or FD, gross domestic product growth or GDP Growth, and inflation or INF adversely influenced NPM. Additionally, the effect of several financing contracts on NPM revealed that only the bai bithaman ajil (BBA) financing contract was substantially connected to NPM. The second research objective implied that the net interest margin (NIM) of conventional parent banks proved insignificant to the Islamic bank NPM. Objectives 1 and 2 were assessed with static panel data, while the remaining objectives were evaluated using either an independent t-test or the Mann Whitney test. As for objective 3, a difference was identified in the NPM charged by Islamic subsidiary and full-fledged Islamic banks where Islamic subsidiary banks imposed lower NPM (on average) than the full-fledged counterparts. Regarding objective 4, a difference was identified in the NPM charged by foreign Islamic and domestic Islamic banks where foreign Islamic banks imposed a higher (on average) NPM than domestic Islamic counterparts. Summarily, the variables affecting NPM need to be controlled by the Islamic banks in order to attain the maslahah (benefit) of all parties. Bank-specific variables also contributed to the NPM differences offered by the subsidiary, full-fledged, domestic, and foreign Islamic banks. In this vein, Islamic banks needed to develop NPM from an Islamic viewpoint based on the fundamental theory (Contract Theory or CT). This research also outlined how the variables originated from a combination of several theories facilitating the current NPM theory.
format	Thesis
author	MAISYARAH BINTI STAPAH @ SALLEH
author_facet	MAISYARAH BINTI STAPAH @ SALLEH
author_sort	MAISYARAH BINTI STAPAH @ SALLEH
title	THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA
title_short	THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA
title_full	THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA
title_fullStr	THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA
title_full_unstemmed	THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA
title_sort	determinants of islamic bank net profit margin: evidence from malaysia
granting_institution	Universiti Malaysia Terengganu
url	http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/1/HG%203368%20.A6%20M32%202021-%20Extract.pdf http://umt-ir.umt.edu.my:8080/jspui/bitstream/123456789/17428/2/HG%203368%20.A6%20M32%202021-%20Full%20Text.pdf
_version_	1776103974172098560

THE DETERMINANTS OF ISLAMIC BANK NET PROFIT MARGIN: EVIDENCE FROM MALAYSIA

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