Determinants of Islamic banks’ profitability: international evidence

Purpose The purpose of this paper was to investigate the determinants of Islamic banks’ profitability using longitudinal data from 1992 to 2008 of almost all Islamic banks in the world. Design/methodology/approach An unbalanced panel data fixed-effects regression model was used. Findings The results of the study indicate that capital ratio, other operating income, GDP per capita, bank size, concentration and oil prices affected Islamic banks positively. Insurance schemes, foreign ownership and real GDP growth affected Islamic banks negatively. Research limitations/implications This study did not include data beyond 2008 (the financial crisis), which can be considered a limitation to this study. However, evidence suggests that including data beyond 2008 would not have changed the outcome of the study[ ]. Originality/value The paper adds to the literature on the determinants of Islamic banks’ profitability for the reasons mentioned above. In addition, this study used a purified sample of Islamic banks (see the Data section for details). Furthermore, to the author’s knowledge, this is the first time deposit insurance has been included in a study related to Islamic banks’ profitability.