Effect of Non-Performing Investment on Islamic Banks performance: An empirical study on Islamic Banks in Bangladesh Shafir Zaman & Md. Mohiuddin Chowdhury The Effect OF FDR, NPF, OEOI, AND Size Toward ROA (Comparative Study on Indonesian Islamic Bank and Malaysian Islamic Bank Period 2010-2015) Anafil Windriya Factors Affecting Customer’s Bank Selection Decision: A Study on Commercial Bank in Jimma Town Ethiopia Serkalem Tesfaye , , Mekuanint Abera, & Tadele Mengesh The Effect Of Expert Management, Professional Skepticism And Professional Ethics On Auditors Detecting Ability With Emotional Intelligence As Modeling Variables (Study At The Makassar City Inspectorate) Murtiadi Awaluddin, Nirgahayu, & Rulyanti Susi Wardhani Determinant of Islamic Pension Fund In Indonesia Roikhan Mochamad Aziz, Acep R. Jayaprawira, & Sulistyowati An Analysis the Rupiah Exchange Rates Effect Against the American Dollar and Inflation Against the Growth of Islamic Banking Mudharab Deposits in Indonesia Muhammad Tho’in , Iin Emy Prastiwi IJIBEC International Journal of Islamic Business and Economics International Journal of Islamic Business and Economics Av a i l a b l e a t h t t p : / / e - j o u r n a l . i a i n p e k a l o n g a n . a c . i d / i n d e x . p h p / I J I B E C / ISSN :2599-3216 E ISSN : 2615-420X EDITORIAL TEAM Editor In Chief Kuat Ismanto. Department of Islamic Economics, IAIN Pekalongan, Indonesia Managing Editor AM. Hafidz Makshum. Department of Islamic Economics, IAIN Pekalongan, Indonesia Editorial Board 1. Shinta Dewi Rismawati. Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia 2. Zawawi Abdul Wahid. Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia. 3. Murtiadi Awaluddin. Universitas Islam Negeri Alauddin Makasar Indonesia. 4. Agus Fakhrina, Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia. 5. Muhammad Shulthoni, Scopus 57203621677 International Islamic University Malaysia 6. Asnaini Asnaini. Department of Islamic Economic IAIN Bengkulu, Indonesia. 7. Agus Arwani, Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia. 8. Rinda Asytuti, Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia. 9. Nafis Irhami, Department of Islamic Economics IAIN Salatiga, Indonesia. 10. Adeel Sabir Khan, Department of Project Management, SZABIST, Pakistan. 11. Umair Riaz, ID SCOPUS: 57192558531 Birmingham City University, Birmingham, B5 5JU, UK. 12. Happy Sista Devy, Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia 13. Ahmad Ajid Ridwan, Scopus: 57203842988, Islamic Economic Studies Department of Economics Faculty of Economics Universitas Negeri Surabaya, Indonesia Administration & IT 1. Aprin Yudiarto, Islamic State Institute of Pekalongan, Indonesia. 2. Nafilah, Islamic State Institute of Pekalongan, Indonesia Office Department of Islamic Economics, Islamic State Institute of Pekalongan, Indonesia Corespondence: ijibec@gmail.com Jl. Kusumabangsa No. 9 Pekalongan Jawa Tengah Indonesia http://e-journal.stain-pekalongan.ac.id/index.php/IJIBEC Effect of Non-Performing Investment on Islamic Banks performance: An empirical study on Islamic Banks in Bangladesh Shafir Zaman & Md. Mohiuddin Chowdhury 1 - 8 The Effect OF FDR, NPF, OEOI, AND Size Toward ROA (Comparative Study on Indonesian Islamic Bank and Malaysian Islamic Bank Period 2010-2015) Anafil Windriya 9 - 22 Factors Affecting Customer’s Bank Selection Decision: A Study on Commercial Bank in Jimma Town Ethiopia Serkalem Tesfaye , , Mekuanint Abera, & Tadele Mengesh 23 - 36 The Effect Of Expert Management, Professional Skepticism And Professional Ethics On Auditors Detecting Ability With Emotional Intelligence As Modeling Variables (Study At The Makassar City Inspectorate) Murtiadi Awaluddin, Nirgahayu, & Rulyanti Susi Wardhani 37-50 Determinant of Islamic Pension Fund In Indonesia Roikhan Mochamad Aziz, Acep R. Jayaprawira, & Sulistyowati 51 - 60 An Analysis the Rupiah Exchange Rates Effect Against the American Dollar and Inflation Against the Growth of Islamic Banking Mudharab Deposits in Indonesia Muhammad Tho’in , Iin Emy Prastiwi 61 - 69 CONTENTS E ISSN: 2615-420X ISSN: 2599-3216 Av a i l a b l e a t h t t p : / / e - j o u r n a l . i a i n p e k a l o n g a n . a c . i d / i n d e x . p h p / I J I B E C / International Journal of Islamic Business and Economics International Journal of Islamic Business and Economics IJIBEC IJIBEC International Journal of Islamic Business and Economics International Journal of Islamic Business and Economics Av a i l a b l e a t h t t p : / / e - j o u r n a l . i a i n p e k a l o n g a n . a c . i d / i n d e x . p h p / I J I B E C / ISSN: 2599-3216 E ISSN: 2615-420X Article Info Article history: Received Accepted Published : 20 Dec 2018 : 09 April 2019 : 11 June 2019 Keywords: Islamic Bank, ROA, Chow test DOI: https://doi.org/10.28918/ ijibec.v3i1.1426 JEL: G.21, F.36 Abstract This research aims to analyze the influence of Financing to Deposit Ratio (FDR), Non Performing Financing (NPF), Operating Expens- es to Operating Income (OEOI), Firm Size toward Return On Asset (ROA). The object of this research are Islamic Bank in Indonesia and Islamic Bank in Malaysia in 2010-2015. Another aim is to determine whether there are differences in effects of FDR, NPF, OEOI and size toward ROA between Islamic Bank in Indonesia and Islamic Bank in Malaysia. Multiple linear regression analysis was used to test the hypothesis in this study. Chow test is used to determine the differ- ences in the effect. The results of this study concluded that FDR, NPF, OEOI and Size effect on ROA simultaneously, both at Indone- sian Islamic Bank and Malaysian Islamic Bank. In Indonesian Islamic Bank, independent variables that influence toward ROA are FDR, OEOI and Size. In Malaysia Islamic Bank, only OEOA wich affecting toward ROA. Based on the chow test, can be concluded that there is a significant difference between the Indonesian Islamic Bank and Malaysian Islamic Bank. Results of independent t test showed that the average variable that has a different effect between Indonesia Islamic Banks and Malaysia Islamic Banks is Size. The Effect OF FDR, NPF, OEOI, AND Size Toward ROA (Comparative Study on Indonesian Islamic Bank and Malaysian Islamic Bank Period 2010-2015) Anafil Windriya Vocational School of Diponegoro University email: anafilwindriya@live.undip.ac.id 10 International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 1. Introduction Islam sees that economic activity is part of muamalah, and muamalah are including part of the Shari’a. Islamic bank is a manifestation of muamalah in economy, both comprehensively and universally, so in Islamic banking embedded in it system of Islam teachings. The Islamic banking industry has a great opportunity as an economic power, because Islamic banks are able to survive amid the economic crisis (Azwar, 2015). Blue print from the ASEAN Economic Community (AEC) on the banking industry, embodied in the ASEAN Banking Integration Framework (ABIF), will be implemented in 2020. In the ten ASEAN countries, there are six countries that have Islamic banks, namely Brunei Darussalam, Indonesia, Malaysia, Myanmar, Philippines, Singapore, and Thailand. Indonesia and Malaysia are the countries with the largest number of Islamic Banks in ASEAN by 2016. The most prominent difference between the sharia banks of Indonesia and Malaysia is the basis of the country, where Malaysia is an Islamic State while Indonesia is a State with Pancasila ideology. Malaysia has different characteristics, such as the economic system adopted, the characteristics of the population, the role of the government, the position of the sharia bank in legislation, the madzhab adopted by the majority of its Muslim population, and the chosen development strategy (Ascarya, 2006). Indonesia’s Islamic banking industry that has a focus on the real sector becomes an advantage for Indonesia. The ability of Islamic banks to face the industry competition in the AEC becomes a concern. The most important issue is how about the performance and health of Islamic banking in each country. Financial ratios can be compared between the financial ratios of a firm and other firms in same industry, to see if there are any deviations from the industry average or from the established standard (Van Horn, 2004). The performance of banks that proxyed by ROA is influenced by various variables. This study using four variables as a variable that affecting ROA. The variables are liquidity (FDR), financing risk (NPF), efficiency (OEOI), and firm size (Size). Figure 1.1 shows the differences of ROA between Indonesian and Malaysian Islamic Bank. Source: Bloomberg, data is processed Figure 1.1 Differences of ROA between Indonesian And Malaysian Islamic Bank The movement of ROA in Malaysian Islamic banking in 2010 to 2015 is more stable than the Islamic bank in Indonesia. The direction of ROA in both countries are increased in 2011, then decreased in a row in 2012 until 2015. The average ROA in Indonesian Islamic banking is always decreasing for 5 years from 2011-2015, even in 2015 experiencing negative value, and the average value of ROA in Malaysian Islamic banking which always decrease during 5 year from year 2011- 2015. That problems become interesting problem to be investigated, whether it is due to liquidity, financing risk, efficiency or firm size. The competition between Indonesian and Malaysian Islamic banking in the Asean Economic Community 2020, and difference of ideology of each country are 11International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 the reasons why this study compares the Islamic banking in Indonesia and Malaysia. Bank intermediation can effectively if they distribute all sources of funds in the form of credit or financing after they calculated with required reserves and daily liquidity (Ascarya, 2010). The function of intermediation is measured by comparing the amount of credit or financing that given to the amount of third party funds that can be collected. Islamic bank financial intermediation is measured by Financing to Debt Ratio. Financing to deposit ratio that increases indicates the source of funds that owned by banks more productive and then the profit obtained by bank may increase. Financial management gives the concept of trade off between profitability with liquidity (Van Horn, 2012). Companies that prioritize liquidity, tend to have idle funds, thereby reducing the chances of obtaining income from investment. For companies that prioritize profitability tend to avoid idle funds and then they maximize asset utilization in the form of investment. According to the theory of financial intermediation, the intermediate function illustrated by the high FDR that indicates the high level of financing so they could increase the return. That statement supported by the research of Almazari (2014), Muda, et al (2013), Mokni and Rachdi (2014). The financing risk is due to the default of debtor for some or whole of the financing provided. Financing risk is measured by non-performing financing ratio, which is the ratio of total non- performing financing to total financing disbursed (Al Smadi and Ahmad, 2011). The larger ratio of non-performing financing will cause the bank in high credit risk condition. The high credit risk provides an opportunity for decrease of profit sharing from the financing that has been given by the bank. The Bank mitigates these risks by establishing a write-off accounts receivable, if the provisioning of earning assets increases, the expense borne by the bank increases, so there is a negative correlation between non-performing financing and the bank’s profit. According to the credit risk management concept theory, it is mentioned that the high credit risk cause profit decreases. That statement supported by the research of Nicolae Petria, et al (2015), Putranto, et al (2014), Muhammad Bilal, et al (2013), Mawardi (2004), Tan Sau Eng (2013), Anggraeni and Suardika (2014), Akhtar, et al (2011), Mokni, R.B.S., and H. Rachdi (2014), Al-Jafari, M.K. and M. Alchami (2014). Operating Expense to Operating Income (OEOI) is an indicator of efficiency level and bank competency to running the firm’s operations (Dendawijaya, 2005). OEOI is the ratio between Operating Cost divided by Operating Income. If Operating Income is higher than operational cost, OEOI value will be lower. Low OEOI is a good bank mirror efficiency. According to the Theory of fundamental signals that the value of high efficiency of business is a good information or signal for the performance of the bank. Banks that operate efficiently bring benefits. If the bank is not able to control the operational costs, then the amount of expenses will increase and cause adverse impact on bank performance. The higher the cost of the bank, the more inefficient operation of operations makes the income is also getting smaller (Wibowo, 2013). That statement supported by the research of \Petria, et al (2015), Almazari (2014), Mawardi (2005), and Ben Khediri Karim, et al. (2010). The theory that explains size of the bank with the profitability states that the large bank receive more income than income outside interest income, like provision income, commission income, fees and administrative income, compared with smaller banks (Ross, 2010). Research about the relationship between the organizational structure and firm size has been done with the result that the greater the bank’s assets, in placing its fund prefer on the securities, placements with other banks, and also can be placed in the central bank (Houston, et al 1997) this activity can reducing risks for banks when compared to lending activities. Large assets indicate that the company has a large portfolio in the number and variety of investment objects. The greater the 12 International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 amount of investment, the greater the opportunity to earn profits, and the more diverse types of investment objects the more diversified risks so that the possibility of losses can be reduced (Mawardi, 2014). The Economies of scale theory refers to a situation where output growth is proportionately faster than input. Improved yield scale or decreased costs arise due to technological and financial reasons. For example the use of I-banking technology, ATMs, remittances, foreign exchange transactions can increase revenue. That statement supported by the research of Petria, et al (2015), Bilal, et al (2013), Kunt (1998), Karim, et al (2010), Muda, et al (2013), Al-Jafari and Alchami (2014), and Owoputi, et al (2014). Financial ratios can be compared between the financial ratios of a firm and other firms in same industry, to see if there are any deviations from the industry average or from the established standard (Van Horn, 2004). Contingency theory was first proposed by Jay Galraith in 1973, who argued that: there is no one way to organize, any way of organizing is not equally effective. Based on the contingency theory, management control system is different in each organization according to organizational factors and situational factors. Comparing Islamic banking in different countries, needs to pay attention to the various characteristics of the country that affect its development. Indonesia and Malaysia are two countries that have different ideology, Malaysia embraces the Islamic State while Indonesia is based on Pancasila. Other differences between two countries are the economic system adopted, the characteristics of the population, the role of the government, the position of the Islamic bank in the legislation, the madzhab adopted by the majority of its Muslim population, and the chosen development strategy (Ascarya, 2006). Contingency theory gives a warning that manager can run the organization according to the will of each. If there are differences in FDR, NPF, OEOI, and Size values, it will affect the ROA differently, so it is worth testing whether there is any difference in the effect on the variable. A few researchers focused on effect FDR, NPF, OEOI, and Size values, toward ROA. There have been limited studies concerned on how about the differentiation effect. Therefore, this research intends to the effect FDR, NPF, OEOI, and Size toward ROA, and also the differentiation effect between Indonesia and Malaysia Islamic banking. 2. Research Method The population of this study are all Islamic banks in Indonesia and Malaysia in the period 2010- 2015. The sample of this research is 4 syariah bank in Indonesia and 3 syariah bank in Malaysia. The sample shown in Table 1. Table 1 Sample of Indonesian Islamic Banks and Malaysian Islamic Banks Malaysian Islamic Banks Indonesian Islamic Banks Affin Islamic Bank Berhad PT Bank Syariah Muamalat Indonesia Alliance Islamic Bank Berhad PT Bank Syariah Mandiri AmIslamic Bank Berhad PT Bank Syariah Mega Indonesia PT Bank Syariah BRI Source: bi.go.id, bnm.go.my Those sample (Table 1) are chosen base on data availability on each bank website and in Bloomberg. Data are sourced from the quarterly financial report published by islamic bank and quarterly balance sheet which obtained from each bank official website and also from Bloomberg. Table 2 show the summary of operational definition all variable. 13International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 Table 2 Summary of Operational Definiton Variable Operational Definition Measurement Scale ROA The ratio between profit before tax toward the average of total asset. (profit before tax / the average of total asset) X 100% Ratio FDR The ratio between financing toward third party funds (financing / third party funds) X 100% Ratio NPF The ratio between non performing financing toward total financing (non performing financing / total financing) X 100% Ratio OEOI The ability of bank management in controlling operational expenses to operating income. (Total operational ex- penses / total operating income) X 100% Ratio SIZE Large scale of a company. Log n Total asset Ratio Source: Muhammad (2005), Machfoedz (1994), and Circular Letter of Bank Indonesia Number 3/30 / DPNP. This analysis is assisted by the Statistical Package for the Social Sciences 23 program or often referred as SPSS. Data in this research that examine by using normality test, classical assumption test, hypothesis test, chow test, and difference t-test. with model equation as follows: Model 1 (Indonesian Islamic Bank): ROA = α 0 + β 1 FDR + β 2 NPF + β 3 OEOI + β 4 Size + e Model 2 (Malaysian Islamic Bank): ROA = α 1 + β 5 FDR + β 6 NPF + β 7 OEOI + β 8 Size + e Variables : ROA: Return on Asset FDR: Financing to Debt Ratio NPF: Non Performing Financing OEOI: Operating Expenses to Operating Income 3. Results 3.1 Coefficient Determination Test / R2 The coefficient of determination or R2 is the ability to predict the effect of the four independent variables (FDR, NPF, OEOI, and Size) toward the dependent variable (ROA). Table 3 Coifficient Determination Model Adjusted R Square Std Error of the Estimate ROA (Indonesian Islamic Bank) 0,291 0,339 ROA (Malaysian Islamic Bank) 0,176 0,060 Source: secondary data that has been processed, 2017. Table 2 shows the coefficient determination for each equation. The value of determinant coefficient (adjusted R2) in Indonesian Islamic Bank is 0,291, it means 29,1% of ROA variation can be explained by variation of four independent variable that is FDR, NPF, OEOI, and Size, and 70,1% explained by other reason beyond the model at Indonesian Islamic Bank. The value of determinant 14 International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 coefficient (adjusted R2) in Malaysian Islamic Bank is 0,176, it means 17,6% of ROA variation can be explained by variation of four independent variable that is FDR, NPF, OEOI, and Size, and 82,4% explained by other reason beyond the model at Malaysian Islamic Bank. 3.2 F Statistic Test The F test that contain the F value is used to see the significance influence of each independent variable on the dependent variable simultaneously. Table 4 Results of F Statistical Test Model F Sig. ROA (Indonesian Islamic Bank) 10,011 0,000 ROA (Malaysian Islamic Bank) 4,625 0,002 Source: secondary data that has been processed, 2017 The results F statistic test of Indonesian Islamic Bank on table 3 shows the value of F 10,011 and at significance level 0,000, which this study uses a predetermined level of significance of 5% it can be concluded that the variables FDR, NPF, OEOI and Size simultaneosly affect to ROA. The F statistical test results for Malaysian Islamic Bank shows the F value is 4,625 and at the level of significance of 0,002, where this study uses a predetermined level of significance of 5% it can be concluded that the variables FDR, NPF, OEOI and Size simultaneosly affect to ROA. 3.3 T Statistic Test T Statistical test is conducted to test whether there is influence of FDR, NPF, OEOI, and size toward ROA of Indonesian Islamic Bank and Malaysian Islamic Bank. Table 5 show the result of t statistic test. Table 5 Results of t Statistics Test Indonesian Islamic Bank B Beta T Sig Constant -0,117 -2,607 0,011 FDR 0,019 0,260 2,583 0,012 NPF -0,009 -0,017 -0,156 0,876 OEOI -0,027 -0,561 -5,318 0,000 Size 1,341 0,262 2,595 0,011 Malaysian Islamic Bank Constant -0,002 -0,159 0,874 FDR 0,003 0,119 0,905 0,369 NPF 0,051 0,278 2,522 0,014 OEOI -0,028 -0,345 -3,128 0,003 Size -0,085 -0,037 -0,280 0,780 Source : secondary data processed, 2017. In Indonesian Islamic Bank, shows the coefficient value for the model of FDR is 0,019 and t 2,583 with the significance level of 0,012, that means the FDR variable affects toward ROA positive significantly. The value of NPF variable regression coefficient is -0,009 and t -0,156 with significance level 0,876 that mean NPF has negative influence and not significant to ROA. The value of coefficient for OEOI model shows -0,027 with the value of t -5,318 and the significance level 0,000 which means that the OEOI variables are negative and significant to the ROA variable, while 15International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 for the coefficient Size variable 1,341 with the value of t 2,595 and the significance level 0,011 which means the variable Size has a positive and significant effect on ROA. Regression equations that can be compiled are as follows: ΔROA = 0,260 ΔFDR – 0,017 ΔNPF – 0,561 ΔOEOI + 0,262 ΔSize + εt In Malaysia Islamic Bank, shows the coefficient value for the model of FDR is 0,003 and t 0,905 with the significance level of 0,874, that means the FDR variable affects toward ROA positive not significant. The value of NPF variable regression coefficient is 0,051 and t 2,522 with significance level 0,014 that mean NPF has positive and significant influence to ROA. The value of coefficient for OEOI model shows -0,028 with the value of t -3,128 and the significance level 0,003 which means that the OEOI variables are negative and significant to the ROA variable, while for the coefficient Size variable -0,085 with the value of t -0,280 and the significance level 0,780 which means the variable Size has a negative and not significant effect on ROA. Regression equations that can be compiled are as follows: ΔROA = 0,119 ΔFDR + 0,278 ΔNPF – 0,345 ΔOEOI - 0,037 ΔSize + εt 3.4 Chow Test Differential influence test is done by comparing the sum of square residual values of the overall model with each model separately in Indonesian Islamic Bank and Malaysian Islamic Bank. Table 6 Restricted Residual Sum of Square Model Restricted Residual Sum of Square (RSS) Indonesian Islamic Bank 9,658 Malaysian Islamic Bank 0,228 Indonesian Islamic Bank and Malaysian Islamic Bank 13,680 Source : secondary data processed, 2017 From the RSS that has been described, it can be seen that: RSS1 (RSS Indonesian Islamic Bank) = 9,658 RSS2 (RSS Malaysian Islamic Bank) = 0,228 RSSur = RSS1 + RSS2 = 9,886 RSSr (RSS overall model) = 13,680 k (Total number of parameters) = 4+4 = 8 n1 + n2 = 89+69 = 158 The chow test is obtained as follows: F = F = F = 14,58 The result of chow test shows F value counted 14,58. The value of F table from df = 158 and k = 4 significance level of 0,05, obtained F table of 2,43. F value is higher than F table, it means that there is difference of influence of FDR, NPF, OEOI, Size toward ROA between Indonesian Islamic Bank and Malaysian Islamic Bank. 3.5 T test The independent sample t-test is used to strengthen the Chow test results. The test results on each independent variable can be shown in Table 7. (RSSr-RSSur)/k (RSSur)/(n1+n2-2k) (13,680-9,889)/4 (9,889)/(158-8) 16 International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 Table 7 Test Results t-test Average Independent 2 Sample t-test for Equality of Means T Sig. (2-tailed) ROA -1.341 0.182 FDR -.588 0.557 NPF 1.244 0.215 OEOI -0.098 0.922 SIZE 2.978 0.003 Table 7 shows that only sizes that have a significance value of less than 0.05, it is concluded that the average Size differed significantly between Indonesian Islamic Bank and Malaysian Islamic Bank. 4. Discussion Table 8 summarizes the results of the research hypothesis test. Tabel 8 Summarizes The Results Of The Research Hypothesis Test No. Hypothesis Results Decision 1a Financing to Deposit Ratio (FDR) has a positive effect toward the profitability of Indonesian Islamic Bank. Positive signif- icant Accepted 1b Financing to Deposit Ratio (FDR) has a positive effect toward the profitability of Malaysian Islamic Bank Positive not significant not ac- cepted 2a Non Performing Financing (NPF) has a negative effect toward the profitability of Indonesian Islamic Bank Negative not significant not ac- cepted 2b Non Performing Financing (NPF) has a negative effect toward the profitability of Malaysian Islamic Bank. Positive signif- icant not ac- cepted 3a Operational Expense to Operating Income (OEOI) nega- tively affects the profitability of Indonesian Islamic Bank. Negative signif- icant Accepted 3b Operational Expense to Operating Income (OEOI) nega- tively affects the profitability of Malaysian Islamic Bank. Negative signif- icant Accepted 4a Firm size has a positive effect toward the profitability of Indonesian Islamic Bank Positive signif- icant Accepted 4b Firm size has a positive effect toward the profitability of Malaysian Islamic Bank Negative not significant not ac- cepted 5 There are simultaneous differences in influence of FDR, NPF, OEOI, and Size variables toward ROA between Indo- nesian Islamic Bank and Malaysian Islamic bank. There is a Difference in Influence accepted 4.1 Indonesian Islamic Bank According to the theory of financial intermediation, the higher FDR of Islamic banks indicates the higher financing that distributed by banks. Large financing can increase the income by profit sharing that obtained by bank. Standard value of FDR in Indonesia is 78% to 92%. Average FDR of the samples bank in the Indonesian Islamic bank is 93.13%. The value is not too far above the standards set by Bank Indonesia, so can be concluded that Islamic bank which became the object 17International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 of this study has performed the intermediation function well, because it can manage the financing effectively. The non-significant effect of NPF toward ROA occurs because of the high FDR at some point can indicates an increase of income from financing. Average of FDR at Indonesian Islamic bank is 93,13%, this value is above the provisions of the central bank in Indonesia. The increased of financing causes the default loss can be covered by the increase in income from the financing. In addition, not significant relationship between NPF and ROA can also occur due to cost efficiency beyond the cost of financing (taxes, rental fees, administration, labor), and income increase by financing, so it can closing the revenue decrease caused by NPF. Statistically the NPF value in 2010 to 2013 has too small variations of data, while the variation of data on ROA is very fluctuate, so it has insignificant effect between NPF toward ROA statistically. The value of OEOI in the sample banks in this study has an average value of 87.48%. This study has results that indicate that larger OEOIs will lead to a decrease in bank profits. OEOI called efficiency ratio, is used as a measure of efficiency and competence of banks carry out its operational activities (Dendawijaya, 20005). The results of this study in accordance with the fundamental signal theory where the higher the efficiency, affect the higher the profit obtained. The lower OEOI indicates the high efficiency of operational costs incurred by Islamic banks. Income bank is influenced by the bank’s efficiency ability to carry out its operations. Low OEOI value signifies the bank’s operational activities run efficiently, so the profit obtained by the bank can increase. The results of this study are in line with the theory of economies of scale which states that the cost advantages obtained by firms due to size, output, or scale of operations, with the cost per unit of output generally decreases with increasing scale (Moore, 1959). Improved yield scale or decreased costs arise due to technological and financial reasons. In the banking only technological reasons that can affect revenue, because the banks do not get discounts on raw material supply. Technology can make work more efficient so as to reduce costs. In addition to the existence of technology, the positive effect between size and ROA is also due to banks that have a large total assets has a relatively large total financing, so, that income on interest on credit (profit sharing) is relatively large too. 4.2 Malaysian Islamic Bank Financing Malaysian Islamic banking is dominated by portfolio Ba’i Bithaman Ajil (BBA) and Murabahah (Natural centainty contract). Cash flow it can be predicted relatively certain because it has been agreed by both parties who transact early in the contract. These contracts offer a fixed and definite return, so they are fixed and predetermined. This product has a very low risk when compared to mudharabah and musyaraka financing, because ba’i have a certainty income, while mudaraba and musyaraka have a risk of default (Natural uncertainty contract). This is the reason why Malaysian Sharia Bank still has a high profit even though the financing are not high. Malaysian Islamic bank invests closely and focuses on bank resilience, so NPF does not have a negative effect on bank profit. Syariah Bank Malaysia has an average NPF of 2.33% and has a maximum value of 4.59%, it can be said that the value is still at a safe limit. The maximum value of NPF of Malaysian Islamic bank is still below the maximum reference value of NPF in Indonesia which is 5%. When the NPF is still below the tolerance level and can still be controlled, the distribution of financing will not be reduced. Financing of Malaysian Islamic banking is dominated by portfolio Ba’i Bithaman Ajil (BBA) and Murabahah (Natural centainty contract). This product has a low risk compared to products that are natural uncertainty contract. The low value of NPF Bank Syariah Malaysia makes NPF will not negatively affect profitability. In addition to that reason, Malaysian 18 International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 Islamic bank also puts its funds on derivative investments in the form of securities, so that its profits can cover losses due to default. The results of this study in accordance with the fundamental signal theory where the higher the efficiency affect the higher the profit obtained. High efficiency is illustrated with low OEOI value. The lower OEOI indicates the high efficiency of operational costs incurred by sharia banks. Bank income is influenced by the bank’s efficiency ability to carry out its operations. Low OEOI value signifies the bank’s operational activities run efficiently, so the profit obtained by the bank can increase. Rajan and Zingales (2001) explained that according to the theory of critical resources, the larger the scale of the firm then profitability also increases too, but at a certain point, size will eventually lower the firm’s profit. The theory of critical resources focuses on the control by the owner of the firm on the firm’s resources. Factors that determine the size of the firm are total assets, technology, or intellectual property. Malaysian Islamic bank has a higher size compared to Indonesia, because Malaysia is supported by its government policy. The Malaysian government puts state-owned enterprises funds in Islamic Banks, and puts a Haj savings deposit into a Sharia Bank. It makes Malaysian Islamic bank assets increasing. Firm size at the bank will require a lot of cost to run its operations, this can reduce the firm’s profit. It can conclude that firm size has no significant effect on ROA variable. 4.3 Comparison between Indonesian Islamic Bank and Malaysian Islamic Bank The results of this study are in line with contingency theory which says that there is no one best way to explain the organization and each way to run the organization its effectiveness is not the same (Galraith, 1973). According to Schott (1981) the best way to run an organization depends on the characteristics of the environment in which it relates. The most prominent difference between the Indonesian Islamic bank and Malaysian Islamic bank is the basis of the country, where Malaysia is an Islamic State while Indonesia is a State with Pancasila ideology. Malaysia has different characteristics, such as the economic system adopted, the characteristics of the population, the role of the government, the position of the sharia bank in the legislation, the school adopted by the majority of its Muslim population, and the chosen development strategy, thus impacting on the different effects on financial ratios. These differences lead to different management controls, and and differences in affect of size toward ROA. Firm Size is obtained from Ln total assets, total assets of Indonesian Islamic bank and Malaysian Islamic bank has a very significant difference. In the fourth quarter of 2015 total assets of 4 Indonesian Islamic bank which became the object of this study is Rp157.489.214.000.000. Total Assets of 3 Malaysian Islamic bank amounted to RM257.451.022.000, or Rp 792.972.763.107.695 in Rupiah, this value is almost five times greater than total assets of Indonesian Islamic banks. It is happens because of differences in government policies of each State. The Malaysian government is very supportive of the development of Islamic banks in the country by placing state-owned enterprises funds and the savings of Haj funds in Malaysian Islamic banks. Significant difference in total asset value and proven by t test, it can conclude that the size of Indonesian Islamic bank and Malaysian Islamic bank have different averages so have different effect on ROA. 19International Journal of Islamic Business and Economics (IJIBEC), 3(1) June 2019, 9-22 5. Conclusions The results of this research concluded that FDR, NPF, OEOI and Size effect on ROA simultaneously, both at Indonesian Islamic Bank and Malaysian Islamic Bank. In Indonesian Islamic Bank, independent variables that influence toward ROA are FDR, OEOI and Size. In Malaysia Islamic Bank, only OEOA wich affecting toward ROA. 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