Munich Personal RePEc Archive

Determinants of Islamic Banking Profitability: Empirical Evidence from Palestine

Abugamea, Gaber (2021): Determinants of Islamic Banking Profitability: Empirical Evidence from Palestine.

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Abstract

The objective of this study is to examine the impact of bank-specific and major macroeconomic factors on the profitability of the biggest two Islamic banks in Palestine over the time period 1997-2018. It employs Pooled Regression analysis to investigate the effect of bank’s asset size, capital, loans, liabilities, operating cost, economic growth and inflation on key bank profitability indicators; return on assets (ROA) and return on equity (ROE), respectively. The main findings show that size and capital have positive impact on ROE. Loans are positively correlated with both ROA and ROE. Liabilities are negatively related to ROA and operating cost has negative impact on both ROA and ROE. Moreover, Islamic banks not benefited significantly from both the inflationary environment and economic growth.

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