Simultaneous Equation Model for Analyzing the Relationship between Efficiency and Performance in Indonesian Islamic Commercial Banks.

Abstract

Islamic banking in Indonesia provides an explanation to Indonesian Muslims about the existence of economic institutions from an Islamic perspective. This study analyzes the relationship between the Efficiency and performance of Islamic Commercial Banks (BUS) operating in Indonesia. The method used is Two-Stage Least Squares. The sample of this study comes from the financial statements of 14 BUS that have been audited by the OJK in the period 2015-2023. The results of the study indicate that in general, capital structure has an influence on the efficiency and performance of BUS in Indonesia. In addition, BUS efficiency and performance also have a significant influence on each other. Model one with an adjusted R-squared of 91.09% shows that CAR, DFR, NPF, and ROA are able to explain the Efficiency variable (BOPO), while the remaining 9.91% is influenced by other factors. In model two with an adjusted R-squared of 94.69%, INV, NOM, LIQ, and BOPO are able to explain the Performance variable (ROA), while the remaining 5.31% is influenced by other factors. The managerial implications of this study are that BUS efficiency and performance, if managed well, can have a positive impact. For the government, this study can help in formulating strategies that can increase BUS returns.