THE IMPACT OF DEBT FINANCING AND EQUITY FINANCING ON PROFIT EXPENSE RATIO OF ISLAMIC BANKS IN INDONESIA

Abstract

The purpose of this study is to determine whether Equity Financing and Debt
Financing partially and simultaneously have an impact on Profit Expense Ratio, also
how the partial effect of each financing systems affect Profit Expense Ratio. This
research is causal research, also called explanatory research is the investigation of
(research into) cause-and-effect relationships. The number of taken samples is two, such
as PT. Bank Muamalat Indonesia (BMI) and PT. Bank Syariah Mandiri (BSM). The
data used in this research are secondary data from published financial statements of
BMI and BSM. The data analysis technique used is linear regression. The results of data
analysis in this research is partially contained direct or positive relationship between
Debt Financing and Equity Financing on Profit Expense Ratio. While the effects of
Debt Financing and Equity Financing as the independent variables (X) simultaneously
affect Profit Expense Ratio as the dependent variable (Y) on Islamic banks, it means
that Debt Financing and Equity Financing simultaneously have significant impacts on
Profit Expense Ratio of Islamic banks. The obtained value of coefficient of
determination (R2) is 0.516 or 51.6%. It means that the variation of these independent
variables, namely Debt Financing and Debt Financing, contribute effects on Profit
Expense Ratio of Islamic Banks. In accordance with the analysis result of this research,
it can be seen that Equity Financing is dominant in affecting Profit Expense Ratio of
Islamic Banks compared to Debt Financing. The researcher suggests management of
Islamic banks to prioritize Equity Financing system, especially Musharaka, because the
said financing system is the most appropriate with Islamic law to apply to muslims.
Keywords : Debt Financing, Equity Financing, Profit Expense Ratio