Impact of Ownership on Financial Performance of Islamic Banks: The Moderating Role of Deposits, Income and Assets

Abstract

The study investigates the moderating impact of ownership structure when it interacts with deposits, income and assets empirically. The analysis of the study was performed through 120 Islamic banks globally spanning over a time period of 2005 – 2022. GMM was employed because of the nature of data. The study finds that moderating variables plays a key role in influencing owners for risk taking. For ROA the domestic ownership shows significant positive impact when interacting with deposits, income and liquid assets on Islamic banks performance and significant negative influence when interacts with total assets while foreign owned banks experienced significant negative impact when interacts with deposits and liquid assets. For ROE the study finds that interacting variables (liquid and total assets) with domestic ownership have significant negative impact on financial performance of Islamic banks similarly when foreign owned banks interacts with total deposits also show negative signs. The study conclude that owners of Islamic banks are influenced by moderating factors. Authors suggest transparency in owner’s decision, strong and independent board oversight to monitor management decisions.

Keywords:

Financial Performance, Islamic Banks, GMM, Ownership, Deposits, Income, Assets.