Determinants of capital buffer in Islamic banks: the lesson from Indonesia

References

• Abbas, F., Ali, S., & Ahmad, M. (2023). Does economic growth affect the relationship between banks’ capital, liquidity and profitability: Empirical evidence from emerging economies. Journal of Economic and Administrative Sciences, 39(2), 1–16. https://doi.org/10.1108/JEAS-03-2021-0056
   Web of Science ®Google Scholar
• Abbas, F., Ali, S., Yousaf, I., & Wong, W. K. (2022). Economics of risk-taking, risk-based capital and profitability: Empirical evidence of Islamic Banks. Asian Academy of Management Journal of Accounting and Finance, 18(1), 1–31. https://doi.org/10.21315/aamjaf2022.18.1.1
   Web of Science ®Google Scholar
• Abbas, F., Yousaf, I., Ali, S., & Wong, W.K. (2021). Bank capital buffer and economic growth: New insights from the US banking sector. Journal of Risk and Financial Management, 14(4), 142. https://doi.org/10.3390/jrfm14040142
   Web of Science ®Google Scholar
• Adesina, K. S., & Mwamba, J. M. (2018). Linking bank regulatory capital buffer to business cycle fluctuations: Do revenue diversification, market power and cost of funding matter? Journal of Economic Studies, 45(3), 565–585. https://doi.org/10.1108/JES-05-2017-0112
   Google Scholar
• Alabbad, A., & Schertler, A. (2022). COVID-19 and bank performance in dual-banking countries: An empirical analysis. Journal of Business Economics, 92(9), 1511–1557. https://doi.org/10.1007/s11573-022-01093-w
   PubMedGoogle Scholar
• Allen, F., Carletti, E., & Marquez, R. (2011). Credit market competition and capital regulation. Review of Financial Studies, 24(4), 983–1018. https://doi.org/10.1093/rfs/hhp089
   Web of Science ®Google Scholar
• Alsharif, M. (2021). Risk, efficiency and capital in a dual banking industry: Evidence from GCC banks. Managerial Finance, 47(8), 1213–1232. https://doi.org/10.1108/MF-10-2020-0529
   Web of Science ®Google Scholar
• Aman, A., Sharif, S., & Arif, I. (2016). Comparison of islamic banks with conventional banks: Evidence from an emerging market. Journal of Management Sciences, 3(1), 22. https://doi.org/10.20547/jms.2014.1603102
   Google Scholar
• Anisa, A., & Sutrisno, S. (2020). Capital buffer and determinant factors of conventional banks in Indonesia. The Journal of Asian Finance, Economics and Business, 7(12), 377–384. https://doi.org/10.13106/jafeb.2020.vol7.no12.377
   Web of Science ®Google Scholar
• Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–279. https://doi.org/10.2307/2297968
   Web of Science ®Google Scholar
• Atici, G., & Gursoy, G. (2012). The determinants of capital buffer in the Turkish banking system. International Business Research, 6(1), 224–234. https://doi.org/10.5539/ibr.v6n1p224
   Google Scholar
• Atikah, N., Susamto, A. A., Saleh, S., & Abdic, F. (2023). The cyclical behavior of capital buffer of Indonesian islamic and conventional banks. International Journal of Islamic Economics and Finance, 6(1), 1–20. https://doi.org/10.18196/ijief.v6i1.13154
   Google Scholar
• Auer, R., Matyunina, A., & Ongena, S. (2022). The countercyclical capital buffer and the composition of bank lending. Journal of Financial Intermediation, 52, 100965. https://doi.org/10.1016/j.jfi.2022.100965
   Web of Science ®Google Scholar
• Ayuso, J., Pérez, D., & Saurina, J. (2004). Are capital buffers pro-cyclical? Evidence from Spanish panel data. Journal of Financial Intermediation, 13(2), 249–264. https://doi.org/10.1016/S1042-9573(03)00044-5
   Web of Science ®Google Scholar
• Azmat, S., Skully, M., & Brown, K. (2015). Can Islamic banking ever become Islamic? Pacific-Basin Finance Journal, 34, 253–272. https://doi.org/10.1016/j.pacfin.2015.03.001
   Web of Science ®Google Scholar
• Banna, H., Ahmad, R., & Koh, E. H. Y. (2017). Determinants of commercial banks’ efficiency in Bangladesh: Does crisis matter? The Journal of Asian Finance, Economics and Business, 4(3), 19–26. https://doi.org/10.13106/jafeb.2017.vol4.no3.19
   Web of Science ®Google Scholar
• Bitar, M., Kabir Hassan, M., & Hippler, W. J. (2018). The determinants of Islamic bank capital decisions. Emerging Markets Review, 35, 48–68. https://doi.org/10.1016/j.ememar.2017.12.002
   Web of Science ®Google Scholar
• Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
   Web of Science ®Google Scholar
• Bougatef, K., & Korbi, F. (2019). Capital buffer and credit-risk adjustments in Islamic and conventional banks. Thunderbird International Business Review, 61(5), 669–683. https://doi.org/10.1002/tie.22022
   Web of Science ®Google Scholar
• Bruno, G. S. F. (2005a). Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models. Economics Letters, 87(3), 361–366. https://doi.org/10.1016/j.econlet.2005.01.005
   Web of Science ®Google Scholar
• Bruno, G. S. F. (2005b). Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals. The Stata Journal: Promoting Communications on Statistics and Stata, 5(4), 473–500. https://doi.org/10.1177/1536867X0500500401
   Google Scholar
• Chen, Y., & Chen, Y. (2014). Are bank capital buffer cyclical? Evidence of developed and developing countries. Journal of Financial Studies, 22(3), 27–55.
   Google Scholar
• Čihák, M., & Hesse, H. (2008). Islamic banks and financial stability: An empirical analysis. Journal of Financial Services Research, 38(2–3), 95–113.). https://doi.org/10.1007/s10693-010-0089-0
   Web of Science ®Google Scholar
• Čihák, M., & Hesse, H. (2010). Islamic Banks and Financial Stability: An Empirical Analysis. Journal of Financial Services Research, 38(2–3), 95–113. https://doi.org/10.1007/s10693-010-0089-0
   Web of Science ®Google Scholar
• Daher, H., Masih, M., & Ibrahim, M. (2015). The unique risk exposures of Islamic banks’ capital buffers: A dynamic panel data analysis. Journal of International Financial Markets, Institutions and Money, 36, 36–52. https://doi.org/10.1016/j.intfin.2015.02.012
   Web of Science ®Google Scholar
• Danarsari, D. N., Viverita., & Rokhim, R. (2018). Capital buffer for stronger bank stability: Empirical evidence from Indonesia’s commercial banks. Pertanika Journal of Social Sciences and Humanities, 26, 55–67.
   Google Scholar
• Daoud, Y., & Kammoun, A. (2020). Financial Stability and Bank Capital: The Case of Islamic Banks. International Journal of Economics and Financial Issues, 10(5), 361–369. https://doi.org/10.32479/ijefi.10147
   Google Scholar
• El-Chaarani, H. (2023). The impact of covid-19 on the performance of Islamic Banks in the Mena region. ISRA International Journal of Islamic Finance, 15(1), 109–129. https://doi.org/10.55188/ijif.v15i1.488
   Web of Science ®Google Scholar
• Etudaiye-Muhtar, O. F., & Abdul-Baki, Z. (2021). Market structure, institutional quality and bank capital ratios: Evidence from developing countries. European Journal of Management and Business Economics, 30(1), 92–107. https://doi.org/10.1108/EJMBE-09-2019-0158
   Web of Science ®Google Scholar
• Fu, X., Lin, Y., & Molyneux, P. (2014). Bank competition and financial stability in Asia Pacific. Journal of Banking & Finance, 38(1), 64–77. https://doi.org/10.1016/j.jbankfin.2013.09.012
   Web of Science ®Google Scholar
• Ghosh, S. (2017). Capital buffers in Middle East and North Africa (MENA) banks: Is market discipline important? International Journal of Islamic and Middle Eastern Finance and Management, 10(2), 208–228. https://doi.org/10.1108/IMEFM-08-2016-0101
   Web of Science ®Google Scholar
• Hisan, U. f C., Septiarini, D. F., & Filianti, D. (2020). Analysis of the factors that influence islamic bank capital buffers in Indonesia. AKRUAL: Jurnal Akuntansi, 12(1), 80. https://doi.org/10.26740/jaj.v12n1.p80-93
   Google Scholar
• Huang, X., & Xiong, Q. (2015). Bank capital buffer decisions under macroeconomic fluctuations: Evidence for the banking industry of China. International Review of Economics & Finance, 36(12), 30–39. https://doi.org/10.1016/j.iref.2014.11.005
   Google Scholar
• Hunjra, A. I., Zureigat, Q., & Mehmood, R. (2020). Impact of capital regulation and market discipline on capital ratio selection: A cross country study. International Journal of Financial Studies, 8(2), 21. https://doi.org/10.3390/ijfs8020021
   Web of Science ®Google Scholar
• Ibrahim, M. H., & Alam, N. (2018). Islamic economics and Islamic finance in the world economy. The World Economy, 41(3), 668–673. https://doi.org/10.1111/twec.12506
   Web of Science ®Google Scholar
• Ibrahim, M. H., Aun, S., & Rizvi, R. (2017). Do we need bigger Islamic banks ? An assessment of bank stability. Journal of Multinational Financial Management, 40, 77–91. https://doi.org/10.1016/j.mulfin.2017.05.002
   Web of Science ®Google Scholar
• Ibrahim, M. H., & Law, S. H. (2020). Financial intermediation costs in a dual banking system: The role of islamic banking. Buletin Ekonomi Moneter Dan Perbankan, 22(4), 531–552. https://doi.org/10.21098/bemp.v22i4.1236
   Google Scholar
• Islam, M. A., Ebenezer, O. O., Sobhani, F. A., & Shahriar, M. S. (2020). The effect of product market competition on stability and capital ratio of banks in Southeast Asian countries. Borsa Istanbul Review, 20(3), 292–300. https://doi.org/10.1016/j.bir.2020.03.001
   Web of Science ®Google Scholar
• Jokipii, T., & Milne, A. (2008). The cyclical behaviour of European bank capital buffers. Journal of Banking & Finance, 32(8), 1440–1451. https://doi.org/10.1016/j.jbankfin.2007.12.001
   Web of Science ®Google Scholar
• Kartika, A., Indriyaningrum, K., Nurhayati, I., & Sudiyatno, B. (2022). Determinants of capital buffer: Study on conventional commercial Banks in Indonesia. European Journal of Business and Management Research, 7(2), 289–294. https://doi.org/10.24018/ejbmr.2022.7.2.1379
   Google Scholar
• Khan, F. N. H. T., Malim, N. A. K., & Masron, T. A. (2021). Islamic regulations and islamic banks margins: An empirical investigation into Asean countries. Journal of Islamic Monetary Economics and Finance, 7(1), 127–154. https://doi.org/10.21098/jimf.v7i1.1327
   Google Scholar
• Koetter, M., Kolari, J. W., & Spierdijk, L. (2012). Enjoying the quit life under deregulation? Evidence from adjusted Lerner Indices for US banks. Review of Economics and Statistics, 94(2), 462–480. https://doi.org/10.1162/REST_a_00155
   Web of Science ®Google Scholar
• Lepetit, L., Saghi-Zedek, N., & Tarazi, A. (2015). Excess control rights, bank capital structure adjustments, and lending. Journal of Financial Economics, 115(3), 574–591. https://doi.org/10.1016/j.jfineco.2014.10.004
   Web of Science ®Google Scholar
• Liu, J. (2015). Bank’ s regulatory capital buffer and counter-cyclical behavior - empirical analysis based on China’ s 18 commercial banks 2. International Journal of Management Science and Business Administration, 2(4), 7–16. https://doi.org/10.18775/ijmsba.1849-5664-5419.2014.24.1001
   Google Scholar
• Maatoug, B. A., Ayed, B. W., & Ftiti, Z. (2019). Are MENA banks’ capital buffers countercyclical? Evidence from the Islamic and conventional banking systems. The Quarterly Review of Economics and Finance, 74, 109–118. https://doi.org/10.1016/j.qref.2019.04.006
   Web of Science ®Google Scholar
• Maharani, N. K., & Setiyono, B. (2018). Do risk, business cycle, and competition affect capital buffer? An empirical study on Islamic banking in Asean and Mena. Journal of Islamic Monetary Economics and Finance, 3(2), 181-200. https://doi.org/10.21098/jimf.v3i2.888
   Google Scholar
• Mateev, M., Moudud-Ul-Huq, S., & Nasr, T. (2021). Capital regulation and market competition in the MENA region: Policy implications for banking sector stability during COVID-19 pandemic. Global Business Review, 1-48. 097215092110644. https://doi.org/10.1177/09721509211064442
   Web of Science ®Google Scholar
• Meslier, C., Risfandy, T., & Tarazi, A. (2020). Islamic banks’ equity financing, Shariah supervisory board, and banking environments. Pacific-Basin Finance Journal, 62, 101354. https://doi.org/10.1016/j.pacfin.2020.101354
   Web of Science ®Google Scholar
• Mia, M. R. (2022). Market competition, capital regulation and cost of financial intermediation: An empirical study on the banking sector of Bangladesh. Asian Journal of Economics and Banking, 7(2), 251–276. https://doi.org/10.1108/AJEB-03-2022-0028
   Google Scholar
• Muhammad, R., Suluki, A., & Nugraheni, P. (2020). Internal factors and non-performing financing in Indonesian Islamic rural banks. Cogent Business & Management, 7(1), 1823583. https://doi.org/10.1080/23311975.2020.1823583
   Web of Science ®Google Scholar
• Nier, E., & Baumann, U. (2006). Market discipline, disclosure and moral hazard in banking. Journal of Financial Intermediation, 15(3), 332–361. https://doi.org/10.1016/j.jfi.2006.03.001
   Web of Science ®Google Scholar
• Nurhikmah, F., & Pangestuty, F. W. (2020). Determinants of banking capital buffer in Indonesia. Journal of Indonesian Applied Economics, 8(1), 13–23. https://doi.org/10.21776/ub.jiae.2020.008.01.3.
   Google Scholar
• Octavianus, H., & Fachrudin, K. A. (2022). Income diversification strategy on bank stability: International banks evidence. Jurnal Keuang Dan Perbankan, 26(3), 2443–2687. https://doi.org/10.26905/jkdp.v26i3.7764
   Google Scholar
• OJK. (2016). Financal service authority regulation No. 11/POJK.03/2016: Bank’s minimum capital adequacy requirement. OJK.
   Google Scholar
• Ozili, P. K., & Outa, E. (2017). Bank loan loss provisions research: A review. Borsa Istanbul Review, 17(3), 144–163. https://doi.org/10.1016/j.bir.2017.05.001
   Web of Science ®Google Scholar
• Pambuko, Z. B., Ichsan, N., & Anto, M. H. (2018). Islamic banks’ financial stability and its determinants: A comparison study with conventional banks in Indonesia. Iqtishadia, 11(2), 371. https://doi.org/10.21043/iqtishadia.v11i2.3346
   Google Scholar
• Priyadi, U., Utami, K. D. S., Muhammad, R., & Nugraheni, P. (2021). Determinants of credit risk of Indonesian Sharīʿah rural banks. ISRA International Journal of Islamic Finance, 13(3), 284–301. https://doi.org/10.1108/IJIF-09-2019-0134
   Web of Science ®Google Scholar
• Risfandy, T. (2018). Equity financing and Islamic Banks’ profitability: Evidence from the biggest muslim country. Jurnal Keuangan Dan Perbankan, 22(3), 496–505. https://doi.org/10.26905/jkdp.v22i3.2150
   Google Scholar
• Risfandy, T., Harahap, B., Hakim, A. R., Sutaryo, S., Nugroho, L. I., & Trinugroho, I. (2020). Equity financing at Islamic Banks: Do competition and bank fundamentals matter? Emerging Markets Finance and Trade, 56(2), 314–328. https://doi.org/10.1080/1540496X.2018.1553160
   Web of Science ®Google Scholar
• Risfandy, T., Tarazi, A., & Trinugroho, I. (2022). Competition in dual markets: Implications for banking system stability. Global Finance Journal, 52, 100579. https://doi.org/10.1016/j.gfj.2020.100579
   Web of Science ®Google Scholar
• Rubio, M., & Yao, F. (2020). Bank capital, financial stability and Basel regulation in a low interest-rate environment. International Review of Economics & Finance, 67, 378–392. https://doi.org/10.1016/j.iref.2020.02.008
   Web of Science ®Google Scholar
• Saadaoui, Z. (2015). The cyclical behaviour of bank capital buffers: An empirical evidence for MENA banking system. Review of Middle East Economics and Finance, 11(2), 145–182. https://doi.org/10.1515/rmeef-2013-0067
   Google Scholar
• Shim, J. (2013). Bank capital buffer and portfolio risk: The influence of business cycle and revenue diversification. Journal of Banking & Finance, 37(3), 761–772. https://doi.org/10.1016/j.jbankfin.2012.10.002
   Web of Science ®Google Scholar
• Smaoui, H., Salah, I. B., & Diallo, B. (2020). The determinants of capital ratios in Islamic banking. The Quarterly Review of Economics and Finance, 77, 186–194. https://doi.org/10.1016/j.qref.2019.11.002
   Web of Science ®Google Scholar
• Sukmana, R., & Febriyati, N. A. (2016). An analysis on financial and social performance of Islamic banks in Indonesia. Jurnal Pengurusan, 47(1), 81–90. https://doi.org/10.1504/IJMEF.2017.087479
   Google Scholar
• Sunarsih, S., Al Hashfi, R. U., Munawaroh, U., & Suhari, E. (2022). Nexus of risk and stability in Islamic banks during the pandemic: Evidence from Indonesia. Journal of Islamic Monetary Economics and Finance, 8(4), 599–614. https://doi.org/10.21098/jimf.v8i4.1444
   Google Scholar
• Sutrisno, S., & Widarjono, A. (2022). Is profit – loss- sharing financing matter for Islamic Bank ‘ s profitability ? The Indonesian case. Risks, 10(11), 207. https://doi.org/10.3390/risks10110207
   Web of Science ®Google Scholar
• Tan, Y., & Floros, C. (2018). Risk, competition and efficiency in banking: Evidence from China. Global Finance Journal, 35, 223–236. https://doi.org/10.1016/j.gfj.2017.12.001
   Web of Science ®Google Scholar
• Trinugroho, I., Risfandy, T., & Ariefianto, M. D. (2018). Competition, diversification, and bank margins : Evidence from Indonesian Islamic rural banks. Borsa Istanbul Review, 18(4), 349–358. https://doi.org/10.1016/j.bir.2018.07.006
   Web of Science ®Google Scholar
• Trinugroho, I., Santoso, W., Irawanto, R., & Pamungkas, P. (2021). Is spin-off policy an effective way to improve performance of Islamic banks? Evidence from Indonesia. Research in International Business and Finance, 56(2020), 101352. https://doi.org/10.1016/j.ribaf.2020.101352
   Google Scholar
• Valencia, O. C., & Bolaños, A. O. (2018). Bank capital buffers around the world: Cyclical patterns and the effect of market power. Journal of Financial Stability, 38, 119–131. https://doi.org/10.1016/j.jfs.2018.02.004
   Web of Science ®Google Scholar
• Wang, Y. (2017). The impact of bank income diversification on capital buffer periodicity. Open Journal of Business and Management, 05(02), 388–400. https://doi.org/10.4236/ojbm.2017.52033
   Google Scholar
• Wasiaturrahma, Sukmana, R., Ajija, S. R., Salama, S. C. U., Hudaifah, A. (2020). Financial performance of rural banks in Indonesia: A two-stage DEA approach. Heliyon, 6(7), e04390. https://doi.org/10.1016/j.heliyon.2020.e04390
   PubMed Web of Science ®Google Scholar
• Widarjono, A., Mifrahi, M. N., & Perdana, A. R. A. (2020). Determinants of Indonesian islamic rural banks’ profitability: Collusive or non-collusive behavior? The Journal of Asian Finance, Economics and Business, 7(11), 657–668. https://doi.org/10.13106/jafeb.2020.vol7.no11.657
   Web of Science ®Google Scholar
• Widarjono, A., & Rafik, A. (2023). Do Islamic banks have their benchmarks for financing rates in the dual banking system? Cogent Economics & Finance, 11(1), 1–17. https://doi.org/10.1080/23322039.2023.2209954
   Web of Science ®Google Scholar
• Widarjono, A., Suharto, S., & Wijayanti, D. (2022a). Do Islamic banks bear displaced commercial risk? Evidence from Indonesia. Banks and Bank Systems, 17(3), 102–115. https://doi.org/10.21511/bbs.17(3).2022.09
   Google Scholar
• Widarjono, A., Suseno, P., Safitri, D. U. R., Yaseen, A., Azra, K., & Hidayah, I. N. (2023). Islamic bank margins in Indonesia: The role of market power and bank-specific variables. Cogent Business & Management, 10(2), 2202028. https://doi.org/10.1080/23311975.2023.2202028
   Web of Science ®Google Scholar
• Widarjono, A., Wijayanti, D., & Suharto, S. (2022b). Funding liquidity risk and asset risk of Indonesian Islamic rural banks. Cogent Economics & Finance, 10(1), 2059911. https://doi.org/10.1080/23322039.2022.2059911
   Web of Science ®Google Scholar