The Effect of Income Diversification and Moderating Role of Health Crisis on the Profitability Performance and Financing Risk of Islamic Banks in MENA and SEA Region

Prameswari Jovita Astuti Putri and V. Viverita ()
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Prameswari Jovita Astuti Putri: Universitas Indonesia
V. Viverita: Universitas Indonesia

A chapter in Proceedings of the 5th International Conference on Global Innovation and Trends in Economy 2024 (INCOGITE 2024), 2024, pp 249-263 from Springer

Abstract: Abstract This study analyses the influence of income diversification on the profitability performance and financing risk of Sharia banks in the Middle East and North Africa (MENA) and Southeast Asia (SEA) region. The research introduces a novel approach by using a health crisis (Covid-19 / Covid-19 Pandemic) as a moderating variable for us to assess the conditional effects of income diversification towards Sharia banks’ profitability performance and financing risk. This study uses regression analysis with interaction terms to capture how health crises moderate these relationships. Results show that income diversification increased Sharia banks’ performance and lowered financing risks. However, the impact of income diversification weakens during the health crisis. These suggest that Sharia banks can diversify income streams as they may experience a buffering effect during economic downturns.

Keywords: Income Diversification; Sharia Banks; Profitability Performance; Financing Risk (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-585-0_18

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DOI: 10.2991/978-94-6463-585-0_18

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