Islamic ethics commitment and bank outcomes: Evidence in South East Asia

Figures & data

Research framework

Independent Variable Dependent VariablesHypotheses

Table 1. Variables and Formulation

No.	Variable	Formula	Data Source
1.	Islamic Ethics Commitment (IEC): The Disclosure of Ethical Identity of Islamic Banks (Haniffa & Hudaib, 2007)	$\mathit{E}\mathit{I}\mathit{I}\mathit{j}=\frac{{\sum }_{\mathit{t}=1}^{\mathit{n}\mathit{j}}\mathit{X}\mathit{i}\mathit{j}}{\mathit{n}\mathit{j}}$Where: EIIj = Ethical Identity Index Firm j nj the number of constructs or items disclosed by jth firm, nj ≤ 78, and Xij = 1 if ith construct or item is disclosed, 0 if ith construct or item is not disclosed, so that 0 ≤ Ij ≤ 1	Annual Report
2.	Financial Performance: Return on Asset (ROA) Return on Equity (ROE) Net Profit Margin (NIM)	ROA = Net income/ Average Total Asset ROE = Net Income/ Average Total Equity NIM = Net Bank Revenue/ Average Total Asset	Bankscope
3.	Firm Risk Non-Performing Financing (NPF) Deposit to Total Asset Ratio (DTA) Financing to Deposit Ratio (FDR)	NPF = Non-performing Financing/ Gross Financing DTA = Total Deposits/ Total Asset FDR = Total Financing/ Total Deposit	Bankscope
4.	Control Variables: -Bank size -Bank Growth -Bank Capital Ratio -Inflation Rate/ Consumer Price Index (CPI) -Gross Domestic Product (GDP) -GDP Growth	Bank size = Ln Total Assets (TA) Bank growth = TAt—TAt-1/ TAt-1 Bank Capital Ratio = Capital Adequacy Ratio CPI = Consumer price index per country GDP = Gross Domestic Product per country GDP growth = GDP Growth per country	Bankscope Bankscope Bankscope WorldBank WorldBank WorldBank

Table 2. Sample selection

No	Country	Number of Islamic Banks	Total Data Observation
1	Brunei Darussalam	1	8
2	Indonesia	12	88
3	Malaysia	16	128
Total Bank and Observation		29	224

Source: Data analysis, 2022

Table 3. Descriptive statistic

Variable	Mean	Std.Dev	Min	Max	Observations
ROA	0.618	2.053	−14.042	10.208	224
ROE	7.387	13.417	−132.525	35.008	224
NIM	2.233	6.371	−8.185	45.133	224
NPF	3.755	8.167	0	73.970	224
DTA	0.875	0.094	0.198	0.999	224
FDR	0.711	0.263	0.004	2.626	224
EII	0.470	0.142	0.231	0.756	224
LnSize	14.845	1.469	10.730	17.909	224
CAR	19.689	12.608	4.8	163.070	224
Growth	0.079	0.185	−0.849	0.978	224
LnGDP	26.825	0.846	23.157	27.744	224
GDP_Growth	4.950	1.166	−2.508	6.030	224
CPI	2.973	1.790	−1.261	6.413	224

Table 4. Correlation Matrix

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)	(13)
(1) ROA	1.000
(2) ROE	0.779	1.000
(3) NIM	0.460	0.280	1.000
(4) DTA	0.130	0.134	−0.220	1.000
(5) NPF	−0.435	−0.246	−0.023	−0.334	1.000
(6) FDR	0.120	−0.010	0.059	0.155	−0.155	1.000
(7) EII	0.099	0.045	0.345	−0.038	−0.029	−0.085	1.000
(8) SIZE	0.246	0.399	−0.123	0.431	−0.171	0.059	−0.293	1.000
(9) CAR	−0.185	−0.125	0.172	−0.785	0.197	−0.242	0.040	−0.415	1.000
(10) Growth	0.327	0.244	0.133	0.150	0.320	0.015	0.125	0.005	0.157	1.000
(11) LnGDP	−0.125	−0.207	0.214	0.020	0.046	0.084	0.490	−0.411	0.134	0.081	1.000
(12) GDP_Growth	−0.051	0.002	0.068	0.236	−0.071	0.111	0.106	−0.117	−0.039	0.104	0.579	1.000
(13) CPI	−0.131	−0.195	0.177	−0.083	0.052	−0.035	0.453	−0.346	0.084	0.066	0.443	0.420	1.000

Table 5. Results of Regression

Dependent	ROA		ROE		NPF		DTA
	RE	FE	RE	FE	RE	FE	RE	FE
EII	2.839** (2.18)	0.417 (0.16)	10.004 (1.06)	3.971 (0.20)	−5.570 (−0.97)	−4.939 (−0.47)	−0.083** (−1.98)	−0.154*** (−3.11)
Size	0.416*** (2.61)	0.586 (1.15)	3.696*** (3.37)	−0.848 (−0.22)	−1.493** (−2.25)	−4.235** (−2.09)	−0.014*** (2.74)	−0.001 (−0.11)
CAR	0.009 (0.77)	0.024** (1.97)	0.138** (1.98)	0.139* (1.65)	−0.099** (−1.99)	−0.404*** (−7.14)	−0.004*** (−13.57)	−0.003*** (−12.43)
Growth	2.899*** (4.49)	2.294*** (3.63)	18.854*** (4.29)	19.159*** (4.07)	−11.083*** (−4.09)	−8.107*** (−3.22)	0.015 (1.24)	0.019* (1.92)
GDP	−0.226 (−0.65)	0.945 (0.59)	−3.135* (−1.71)	−2.301 (−0.19)	1.149 (0.85)	9.003* (1.72)	0.005 (0.45)	−0.004 (−0.16)
GDP_Growth	−0.006 (−0.03)	0.009 (0.06)	1.267 (1.12)	0.652 (0.51)	−0.694 (−1.00)	−0.354 (−0.52)	0.004 (1.28)	0.001 (0.41)
CPI	0.434 (0.46)	0.167* (1.72)	0.402 (0.62)	0.559 (0.68)	−0.299 (−0.75)	−0.708* (−1.83)	−0.001 (−0.39)	−0.001 (−0.34)
Constant	−1.317 (−0.13)	−34.444 (−0.84)	20.321 (0.32)	10.689 (0.23)	4.954 (0.13)	−16.097 (−0.98)	0.544** (1.98)	1.004* (1.66)
N. Obs	224	224	224	224	224	224	224	224
N. Banks	29	29	29	29	29	29	29	29
R-sq within	-	0.0962	-	0.1022	-	0.2585	-	0.5128
R-sq overall	0.1831	-	0.2387	-	0.0954	-	0.6406	-
Bruesch Pagan test	22.05***		7.23**		22.26***		255.02***
Hausman tests fixed effects (FE) vs. random effects (RE)
Chi-sq.	7.13		11.98		12.96		8.56
P-value	0.4154		0.1011		0.0917		0.3458

Note: *, **, and *** are significant at 10%, 5%, and 1%, respectively. Robust t-statistics are in parentheses.

Table 6. Results of regression

Dependent	NIM		FDR
	RE	FE	RE	FE
EII	11.083*** (2.66)	0.417 (0.16)	−0.313* (−1.88)	−1.138*** (−3.73)
Size	0.064 (0.12)	0.586 (1.15)	−0.033 (1.17)	0.011 (0.18)
CAR	0.038* (1.66)	0.024** (1.97)	−0.003** (−2.17)	−0.003** (2.25)
Growth	1.309 (0.92)	2.294*** (3.63)	−0.089 (−1.20)	−0.078*** (−1.07)
GDP	0.413 (0.42)	0.945 (0.59)	0.074* (1.78)	0.468** (2.53)
GDP_Growth	−0.294 (−0.78)	0.009 (0.06)	−0.021 (−1.06)	−0.034** (−1.98)
CPI	0,544*** (2.86)	0.167* (1.72)	0.001 (0.06)	0.024* (1.90)
Constant	−1.554 (−0.53)	−34.444 (−0.84)	−1.734 (−1.10)	−12.387** (−2.60)
N. Obs	224	224	224	224
N. Banks	29	29	29	29
R-sq within	-	0.0781	-	0.1227
R-sq overall	0.1305	-	0.0543	-
Bruesch Pagan test	133.70***		161.07***
Hausman tests fixed effects (FE) vs. random effects (RE)
Chi-sq.	12.54		10.74
P-value	0.0866		0.2136

Note: *, **, and *** are significant at 10%, 5%, and 1%, respectively. Robust t-statistics are in parentheses.

Haniffa, R., & Hudaib, M. (2007). Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports. Journal of Business Ethics, 76(1), 97–116. https://doi.org/10.1007/s10551-006-9272-5

 Web of Science ®Google Scholar