Ach Yasin, Ladi Wajuba Perdini Fisabilillah, Sulistya Rusgianto, Imamuddin
Indonesia, as the country with the largest Muslim population in the world, possesses substantial potential for the development of Islamic finance. This potential is reflected in the growth of Islamic banking institutions in Indonesia, which have consistently demonstrated positive, resilient performance. Nevertheless, Islamic banking's market share remains approximately 7.7%. This study aims to examine the effects of corporate governance, financing risk, Shariah compliance, and earnings management on the performance of Islamic banks in Indonesia. Panel data regression is employed using data from eight Islamic banks over the period 2013–2025. This method enables the analysis of both cross-sectional and time-series variations, allowing a more comprehensive examination of the determinants influencing Islamic banks' financial performance. The findings indicate that the variables of non-performing financing (NPF), and Operational Costs to Operating Income (BOPO) partially have a significant effect on the performance of Islamic banks. In contrast, the number of Shariah Supervisory Board (SSB/DPS) members, the number of commissioners, the number of audit committee members, Financing to Deposit Ratio (FDR), profit-sharing ratio (PSR), and Islamic income ratio (IsIR) and the allowance for impairment losses (CKPN) have no statistically significant effect on Islamic bank performance. These results emphasise that improvements in the financial performance of Islamic commercial banks depend more on the quality of risk management and the implementation of substantive efficiencies than solely on governance and capital structure. Furthermore, economic factors also do not significantly influence the financial performance of Islamic banks in Indonesia. Therefore, Islamic banks need to strengthen their risk management practices and improve efficiency across their operations. In addition, the business model of Islamic banks should prioritize the development of financing portfolios with relatively lower risk profiles in order to enhance their competitiveness within the banking industry. Copyright (c) 2026 The Authors. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Faculty of Economics and Business, Universitas Negeri Surabaya, Indonesia; Faculty of Economics and Business, Universitas Airlangga, Indonesia; Academy of Islamic Studies, Universiti Malaya, Kuala Lumpur, 50603, Malaysia
