Bank Performance in Achieving Islamic Bank Stability Conditions: Evidence From Islamic Banks in Indonesia

Abstract

This study aims to analyze the effect of Islamic bank performance on Islamic bank stability in Indonesia. Methodology using monthly time series data from OJK Islamic Banking Statistics 2015-2022, this study utilizes ECM and ECT tests to examine the long-run impact and short-run response of operational efficiency, liquidity, and bank size on Islamic bank stability. Findings this study found that the performance of Islamic banks in terms of operational efficiency has a negative and significant effect on the stability of Islamic banks both in the short and long term. Furthermore, liquidity has a positive and insignificant effect on the stability of Islamic banks in the long term, but has a positive and significant effect in the short term. Meanwhile, bank size has a positive and significant effect on the stability of Islamic banks in the long term, but for the short term it has a negative and insignificant effect.