The determinants of Islamic banks profitability: a panel data analysis of Malaysia Islamic banks

This study aims to investigate the factors that affect the profitability of Islamic Banks in Malaysia. The research focuses on 13 Islamic Banks registered under Bank Negara Malaysia, closely observing internal factors that may influence profitability. The dependent variable is Islamic Bank profitability, measured by Return on Assets (ROA). The three independent variables selected for this study are bank size, operational cost, and asset turnover. Data from the sample of 13 Islamic Banks were pooled annually over seven years (2008–2014), resulting in 90 total observations. The data were collected from the banks’ annual statements, primarily obtained from BankScope. Employing a quantitative approach, this study uses panel data analyzed through a Multiple Regression Model using Ordinary Least Squares (OLS). The results reveal that operational cost has a negative significant effect in determining bank profitability, while asset turnover shows a positive significant relationship. However, the findings indicate that bank size is not a significant predictor of Islamic banks’ profitability, as the result shows an insignificant relationship between bank size and ROA.