ASSESSING THE IMPACT OF OPERATIONAL EFFICIENCY, CAPITAL STRUCTURE AND CAPITAL ADEQUACY ON ISLAMIC BANK PROFITABILITY IN MALAYSIA
DOI:
https://doi.org/10.35631/AIJBES.829067Keywords:
Islamic Banking, Profitability, Operational Efficiency, Debt Ratio, Capital Adequacy RatioAbstract
Bank Negara Malaysia reported in 2025 that the total Malaysian Islamic Banking Assets has reached USD312 representing 82% Malaysia’s share out of total ASEAN. In Malaysia, the Islamic banking sector continues to grow rapidly yet the Islamic banks struggle to balance the operational efficiency, debt ratio and capital adequacy all of which are important to the financial performance. This study aims to examine the impact of operational efficiency, debt ratio and capital adequacy ratio on the Islamic bank profitability in Malaysia. Profitability is measured using the Return on Assets (ROA). The study uses panel data from the annual report of 11 Islamic banks in Malaysia from 2014 to 2023. Panel EGLS (cross-section weights) was used to analyze the data. The findings show that operational efficiency and capital adequacy ratio have a significant negative on profitability while the debt ratio has a significant positive impact. This research provides insight for the Islamic bank management, regulators and investors to strengthen the financial performance.
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