Determinants of Firm Value Islamic Banks in Indonesia

Abstract

The growth of Islamic banking, which has become one of the alternatives to finance, increased as the year went on. Islamic banks, which are also a form of company, need to pay attention to determinants of the firm’s value for them to survive. The primary aim of this study was to analyze the determinants that influence the firm value of Islamic banks in Indonesia. The research uses a quantitative explanatory approach to assess the firm value relationship between eight selected Islamic banking institutions from 2018 to 2022. The data variables used to assess the bank’s financial performance consist of liquidity, leverage, profitability, and operational efficiency. The study uses secondary data sourced from the annually reports of the chosen Islamic banks, with SPSS as an auxiliary software to process the statistical data. The results of the study show 1) a positive and statistically not significant relationship between liquidity and Islamic banks firm value in Indonesia; 2) a negative and statistically significant relationship between leverage and Islamic banks firm value in Indonesia; 3) a positive and statistically significant relationship between profitability and Islamic banks firm value in Indonesia; and 4) a negative and statistically significant relationship between operational efficiency and Islamic banks firm value in Indonesia. The study’s practical consequences pertain to the management of Islamic banks in Indonesia, which should devise strategies pertaining to leverage, profitability, and operational efficiency. Additionally, Islamic banks in Indonesia should design Islamic bank strategies that address both internal and external elements that influence firm value.