Published date: Jan 24 2024

Journal Title: KnE Social Sciences

Issue title: The 6th International Research Conference on Economics and Business (6th IRCEB)

Pages: 11–22

DOI: 10.18502/kss.v9i4.15055

Mochamad Dandy Hadi Saputradandymochamad23@gmail.comDepartment of Economic Development, Faculty of Economics and Business, Universitas Negeri Malang

Inayati Nuraini DwiputriDepartment of Economic Development, Faculty of Economics and Business, Universitas Negeri Malang

This study was directed to determine the impact of financial indicators compiled in public reports on the long-term and short-term performance of Islamic banks in Indonesia. The scope of this study is between 2017 and 2021. This study uses the Vector Error Correction Model (VECM) method. The analytical steps used in VECM modeling are Granger causality, long-term and short-term VECM analysis, impulse response functions, and variance decomposition. Results of this study show that the independent variables subsisting of BOPO, CAR, FDR, MFP, NPF, and STM have long-term effects on ROA. However, CAR variables do not show significant impacts in the short term. The implications of this research are to back business efficiency in other banking services such as safe deposit boxes, hedging activities, and manufacturing sector financing based on more accountable and credible risk management. The freshness of this study is that it incorporates the results of Granger causality analysis, which reveals bidirectional relationships for each variable. In addition, Granger causality shows correlations, allowing study variables to be explored more deeply in further studies.

Keywords: financial indicators, Vector Error Correction Models, Islamic banks, performance

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