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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
Published: Universiti Malaysia Terengganu 2022
Subjects:
Islamic banks
financing
HG 3368 .A6 M32 2021
Online Access:http://umt-ir.umt.edu.my:8080/handle/123456789/17428
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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 Islamic banks financing HG 3368 .A6 M32 2021 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. 2022-09-04T13:48:42Z 2022-09-04T13:48:42Z 2021 Thesis http://umt-ir.umt.edu.my:8080/handle/123456789/17428 en application/pdf application/pdf Universiti Malaysia Terengganu
institution Universiti Malaysia Terengganu
building Perpustakaan Sultanah Nur Zahirah
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Malaysia Terengganu
content_source UMT-IR
url_provider http://umt-ir.umt.edu.my:8080/
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
publisher Universiti Malaysia Terengganu
publishDate 2022
url http://umt-ir.umt.edu.my:8080/handle/123456789/17428
_version_ 1744354990710849536
score 13.222552

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