The Effect of Financial Soundness Indicators on Decision Profitability of Islamic Banks in Bahrain

• Published in: 2024 International Conference on Decision Aid Sciences and Applications, DASA 2024
• Main Author: Hasan H.; Ali M.; Qeshta M.; Mutalib H.A.; Nurmala Sari E.
• Format: Conference paper
• Language: English
• Published: Institute of Electrical and Electronics Engineers Inc. 2024
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85217225119&doi=10.1109%2fDASA63652.2024.10836470&partnerID=40&md5=ec84c417c47db32e174b75638ee3e806

Financial indicators are tools that can help to quantify and qualify the soundness and vulnerability of decision making in financial systems. The purpose of this research is to have an impact of financial soundness on the profitability of Islamic bank. This study uses capital adequacy ratio, non-performing loans ratio, liquid assets ratio as measurements for financial soundness indicators and return on equity as a measurement for profitability. The time series data utilized by this study is from 2013 until 2023 for the Kingdom of Bahrain. Multiple linear regression and granger causality test were used. The result showed that the non-performing loans ratio has a negative significant effect on profitability of Islamic bank. Meanwhile, the granger causality result found a one direction relationship which is non-performing loans ratio to return on equity. © 2024 IEEE.