Implementation of Risk Management and Capital Structure on Financial Performance: A Study of Islamic Banking in Indonesia

Abstract

This study examines the influence between risk management and capital structure on the financial performance of Islamic Commercial Banks (BUS) in Indonesia with 3 measurement proxies, namely ROA, ROE, and zakat. ROA's financial performance will be used as a key proxy in this study. Meanwhile, ROE and zakat will be used as additional proxies to see the difference in results between the three of them. Risk management is measured by parameters of credit/financing risk management (NPF), liquidity risk (FDR), and operational risk (BOPO). Meanwhile, capital structure is measured using the ratio of CAR and DER. This study also added five control variables: company size, income stability, asset growth, third-party funds, and financing. This study used panel data and purposive sampling techniques to determine the sample. Data obtained is on published financial statements of Islamic commercial banks for 2008-2019. The data analysis technique used is a multiple regression analysis technique using E-views 9 program. The results showed that BOPO and CAR variables affected financial performance (ROA), while NPF, FDR, and DER have no effect on financial performance (ROA), and there were inconsistencies in results with ROE and Zakat proxies.