Does Intellectual Capital Efficiency Translate in the Post-pandemic Era for Islamic Banks in Indonesia?

Abstract

PURPOSE: This study aims to identify the key determinants of financial performance in Islamic banks, specifically focusing on the Financing to Deposit Ratio (FDR) and Capital Adequacy Ratio (CAR). Additionally, it explores the applicability of these determinants in a post-pandemic environment. DESIGN/METHODOLOGY/APPROACH: The research utilizes data from two prominent Indonesian Islamic banks, Bank Syariah Indonesia (BSI) and Bank Muamalah Indonesia (BMI), for the pre-pandemic period (2016-2020). Ordinary Least Squares (OLS) regression analysis is employed to investigate the influence of Human Capital Efficiency (HCE), Structural Capital Efficiency (SCE), and Capital Employed Efficiency (CEE) on both FDR and CAR. FINDINGS: The model analyzing determinants of FDR explains a significant portion (48.99%) of the variance. Interestingly, only Capital Employed Efficiency (CEE) exhibits a statistically significant negative relationship with FDR. Conversely, the model for CAR lacks a statistically significant fit. ORIGINALITY: This research contributes by examining the impact of intellectual capital components (HCE, SCE, CEE) on financial performance ratios (FDR, CAR) within the Indonesian Islamic banking context. RESEARCH LIMITATIONS: The study is limited to data from two Indonesian banks during a specific timeframe. Further research with a broader sample size and encompassing the post-pandemic era would enhance generalizability. PRACTICAL IMPLICATIONS: The findings offer valuable insights for stakeholders in Indonesian Islamic banking, particularly regarding the importance of efficient capital utilization for managing financing activities and maintaining healthy FDR levels. SOCIAL IMPLICATIONS: By enhancing the financial performance of Islamic banks, this research indirectly contributes to the development of a more robust Islamic financial system that caters to the ethical and social banking needs of the community.