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RESEARCH ARTICLE

Copyright © 2017 American Scientific Publishers Advanced Science Letters


All rights reserved Vol. 23, 8, 2017
Printed in the United States of America

Factors Affecting Profit Distribution Management


of Syariah Banks in Indonesia
Fernando Africano1*, Sri Megawati Elizabeth P1,Ricardo Parlindungan 1
1
STIE Multi Data Palembang, 30113, Indonesia

The purpose of this study is to analyze the effect of Capital Adequacy Ratio (CAR), Operating Expense to Operating
Revenues Ratio (OER), Financing to Deposit Ratio (FDR), Proportion of Depositor’s Funding (Deposit), Purchase Financing
(PJB), and Profit Sharing Financing (PBH) to Profit Distribution Management (PDM) and Return On Assets (ROA) as an
intervening variable of the Islamic banks in Indonesia. The sample determined by using purposive sampling based on
Indonesia Syariah Bank for period of 2009-2013. The population in this research is 11 Syariah Banks, which 5 Syariah Banks
are chosen based on purposive sampling. For analysis the data, path analysis is chosen and Sobel Test is used to test the
intervening variable. The result of the research shown that internal bank factor (CAR) give positive effect to ROA. However,
the internal bank factors (OER, FDR and Deposit) give negative effect on ROA, while the other internal factors (PJB and
PBH) do not affect ROA. The internal bank factors (OER and PBH) give positive effect to PDM, the internal bank factors
(FDR and Deposit) give negative effect to PDM, while internal bank factors (CAR and PJB) do not affect PDM. ROA gives
positive effect on PDM. ROA only use as intervening variable for variable of internal bank factors (OER and PJB).

Keywords : CAR, OER, FDR, Deposit, PJB, PBH, ROA, PDM.

1. INTRODUCTION and consider the level of profit from investments in Syariah


Syariah banks which banks in its activities, both in raising banks.
funds and distributing funds in order to distribute and impose 2. LITERATURE REVIEW
profit sharing based on Syariah principles27. In the process of A. Profit Distribution Management (PDM)
raising funds and distributing funds, Islamic banks implement Profit distribution management measurement uses asset
the share system by revenue sharing method as well as for spreads as proxy which describes revenue sharing and profit
profit and risk (profit and loss sharing)35. sharing4,32. Asset spread is the most powerful indicator to
Revenue sharing system makes the size of the profit calculate the PDM. Asset spread is the absolute spread between
received by depositors (shahibul maal) to follow the size of the Return on Assets (ROA) and average Return on Investment
Islamic banks’ profit. Distribution of depositors funds which Account Holder (ROIAH) which is the average return for
have been collected will be placed by Islamic banks to the depositors.
productive sector (financing) that generates profit16. The B. Profitability (ROA)
concept of revenue sharing could run if the depositors’ funds in Profitability ratio is used to measure the ability of the
the bank invested in the business, then its profit will be shared. company to generate earnings by using their assets3. When
The bank’s contractual obligation is to share profits by utilizing ROE is usually used for the company in general, ROA is
depositors' funds through the financing which is called profit usually used for the banking industry28. ROA is used to measure
distribution (PD). the effectiveness of the company in generating profits by
Managers Islamic bank in Indonesia do Profit Distribution utilizing its assets. The size of the share obtained is determined
Management (PDM) which refers to conventional bank interest by the success of the fund manager to generate revenue.
rates. It is associated with the type of customer in Indonesia. H1 : ROA positively affects PDM.
Indonesian Islamic bank depositors are divided into several C. Capital Adequacy Ratio (CAR)
market segments. In Indonesia there are three market segments, CAR can be used to measure the capital adequacy of
that are sharia loyalist (consisting of religious adherent), Islamic banks. The capital adequacy describes the bank's ability
floating segment (combination of religion and the market power) to maintain sufficient capital to cover the risk of loss that may
and conventional loyalist8. Depositors of the target profit occur from the funds investment in productive assets that
maximization 11. 70% of depositors of Islamic banking are in the contain risks, as well as for financing in fixed assets and
floating segment, which is sensitive to the rate of profit 7. investment15. CAR is one of the variables that can be used to
Factors which being considered by people to invest in Islamic measure the performance of the bank, which is reflected in the
banks is the profit return13. Depositors will always pay attention components of CAMEL (Capital, Assets, Management,
Earnings, Liquidity)36. This is supported by prior research
*Email Address : Fernando.okkie@gmail.com
1 Adv. Sci. Lett. 23, 8, 2017 1936-6612/2017/8/7183/043 doi: 10.1166/asl.2017.9324
Adv. Sci. Lett. 23, 8, 2017 RESEARCH ARTICLE

which stated that CAR has a positve effect on ROA5, 19, 29, 30. maximum function or even become dysfunctional. Deposit is a
CAR can be used to measure the capital adequacy of proxy that illustrates how dependent the bank to deposit.
Islamic banks15. High CAR makes the bank able to reduce the H8 : Deposit positively affects and PDM.
risks that appear, so that the bank manager bolder perform H9 : ROA mediate the effect of the Deposit to PDM.
PDM that refers to the interest rate because the bank is in a safe G. Financing
condition. This is supported by research which stated that CAR Financing is one of the bank's main activity, that is
has a positve effect on the PDM9,16. providing facilities for provision of funds to meet the needs of
H2 : CAR positively affects ROA and PDM. the parties who are deficit units1. Financing is equivalent with
H3 : ROA mediates the effect of the CAR to PDM. the provision of funds claims, based on a lending agreement
D. Operating Expense to Operating Revenues Ratio (OER) between financial institutions and other parties who require to
OER is a measure of what it costs of a bank to operate repay the debt after a certain period, in exchange for the
compared to the income that the bank brings in. The operating return24. Financing is measured by Loan Assets to Total Assets
expense ratio is calculated by dividing bank's operating expense ratio4. The intensity of the financing will affect the return and
by its gross operating income. Investors using the ratio can will affect income earned. This is supported by research which
further compare each type of expense, such as utilities, stated that purchase financing (PJB) has a positve effect on
insurance, taxes and maintenance, to the gross operating ROA21 and research which stated that profit sharing financing
income, as well as the sum of all expenses to the gross (PBH) has a positve effect on ROA14.
operating income25. The higher the cost of bank revenue means The amount of financing will determine the level of Islamic
the less efficient in operations so that their income is getting banks profit distribution. The higher financing ratio, the higher
fewer34. This is supported by prior research which states that the level PDM. Financing is the single factor that significantly
OER has a negative effect on ROA6,.17, 19, 29. affects the profit distribution management2. This is supported
Theoretically, the value of OER will be decreased if the by research which states that the purchase financing variable
operating costs decreased. If OER is lower, the bank will be (PJB) has a positve effect on profitability (ROA)20 and research
more efficient in cost of financing in order to generate the which states that PJB and PBH has a positve effect on ROA4,9,16.
higher revenue. If OER decreased, income will be increased. H10 : PJB and PBH positively affects ROA and PDM.
With an increase in bank’s income, the share received by H11 : ROA mediates the effect of PJB and PBH to PDM.
customers also increase. This is supported by research which 3. RESEARCH DESIGN
stated that OER has a negative effect on PDM31. A. Population and Sample
H4 : OER negatively affects ROA and PDM. The samples in this study determined using purposive
H5 : ROA mediates the effect of the OER to PDM. sampling method, this research used five sample of Islamic
E. Finance to Deposit Ratio (FDR) Banks in Indonesia.
FDR is a commonly used for assessing a bank's liquidity by B. Data analysis method
dividing the banks total loans by its total deposits. If the ratio is This study use of path analysis technique with SPSS.
too high, it means that banks might not have enough liquidity to ROA = α + βCAR + βOER + βFDR + βDeposit + βPJB +
cover any unforseen fund requirements; if the ratio is too low, βPBH + e1 (Structural Equation 1)
banks may not be earning as much as they could be. Concept of PDM = α + βROA + βCAR + βOER + βFDR + βDeposit +
FDR developed from Loan to Deposit Ratio (LDR)1. The better βPJB + βPBH + e1 (Structural Equation 2)
the health of banks as their funding channeled smoothly, thus 4. EMPERICAL RESULT
increasing the bank's revenue. This is supported by prior A. Assumtion Classical Linear Regression
research which stated that FDR variable has a positve effect on Tabel 1 Assumtion Classical Linear Regression
ROA19,26, 29, 30. Kolmogorov-Smirnov Normality Test
FDR shows how far the bank's ability to manage financing Structural Equation 1 Structural Equation 2
sourced from customer funds. The level of an acceptable share Sig 0,410 0,602
for customer will depend on the amount of channeled funds Multiplier Lagrange Test (Linearity Test)
(reflected in FDR), as the more productive funds distributed in R Square 0,052 0,054
the financing, the share received is greater. This is supported by
Multicollinearity Test with Tolerance and VIF
research which stated that FDR has a positve effect on PDM9,33.
Model Tolerance VIF Tolerance VIF
H6 : FDR positive affects on ROA and PDM.
ROA - - 0,428 2,338
H7 : ROA mediates the effect of the FDR to PDM.
CAR 0,423 2,362 0,403 2,479
F. Proportion of Depositor’s Funding (Deposit)
OER 0,338 2,960 0,187 5,353
Customer funds are able to influence the budget a bank.
FDR 0,531 1,882 0,464 2,156
Budget increases with increasing depositors' funds. Depositor
Deposit 0,290 3,453 0,248 4,030
measured by the percentage of depositors' funds to total assets.
Deposit is the market share of depositors funds collected by PJB 0,337 2,651 0,367 2,724
each bank individually. The higher this ratio, the better the level PBH 0,226 3,760 0,259 3,854
of public confidence in the bank's performance (ROA). This is Durbin-Watson Autocorrelation Test
supported by research which states that Deposit has a positve DW 1,320 0,900
effect on ROA29. White Method Heteroscedasticity
Deposit are variables that describe how large the bank's R Square 0,828 0,297
dependence on clients' funds. Fund is a major concern for the Accourding to the table above, it can be concluded that the
bank as a financial institution, because funds collected from the data were normally distributed, the correct model is a linear
community turned out to be the largest resource on most banks. model, there is no multicollinearity, no autocorrelation, and
If the funds are not enough, the bank is not able to perform its heteroscedasticity in the model is rejected.

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RESEARCH ARTICLE Adv. Sci. Lett. 23, 8, 2017

B. Sub Structure Analysis dependence on debt, so in this study the more effective
Table 2 Structural Equations 1 and Structural Equations 2 management of third party funds, the more funds are channeled
Structural Equation 1 Structural Equation 2 to support operational activities, and the portion of the shared
R R revenue become smaller.
F Sig F Sig The results showed that Deposit has a significant negative
Model Square Square
0,572 20,744 0,000 0,641 23,481 0,000 effect on ROA. Data from Bank Indonesia showed that the
Beta t Sig. Beta t Sig. composition of the largest third-party funds in the form of
Constant - 7,007 0,000 - 0,214 0,831 deposits, which is the type most expensive source of funding,
ROA - - - 0,836 8,749 0,000 because it has the highest margin among other funding sources,
CAR 0,224 2,149 0,034 0,033 0,334 0,739 such as savings and checking accounts. Therefore, an increase
OER -1,012 -8,670 0,000 0,330 2,280 0,025 Deposit during the research period may decrease due to Deposit
FDR -0,343 -3,683 0,000 -0,253 -2,754 0,007 of the largest ROA derived from deposits that create increased
Deposit -0,497 -3,941 0,000 -0,323 -2,576 0,012 bank funding costs and ROA decreased. The results showed
PJB 0,176 1,594 0,114 0,025 0,242 0,810 that Deposit has a significant negative effect on the PDM.
PBH -0,200 -1,523 0,131 0,302 2,461 0,016 Farook argues that it can be happened when Islamic banks are
The effect of CAR, OER, FDR, Deposit, PJB and PBH to in monopolistic competition conditions4. In this form of
ROA simultaneous is 57.2% and to PDM simultaneous is competition, there are many sellers where each seller has
64.1%. F-statistic > F-table and significance < 0.05 so market power. It because the items in the market have been
regression model is fit and significant. differentiated, or in other words the existing goods not perfect
The results showed that ROA has positive and significant substitutes.
effect on the PDM. ROA is used to measure the effectiveness of The results showed that PJB has no effect on ROA, it
the company in generating profits by exploiting its assets. because the PJB which distributed by banks to customers may
The results showed that CAR has a significant positive not be paid consistenty with the agreement that has been agreed
effect on ROA. CAR is one of the variables that can be used for between the bank and its customers. The results showed that
measuring the bank performance, which is reflected in the PJB has no effect on the PDM, it because Islamic banks were
components of CAMEL (Capital, Assets, Management, used as a sample are healthy banks and can manage the
Earnings, Liquidity)36. Therefore, the amount of capital a bank financing strategy. In determining the feasibility of financing,
will affect the amount of productive assets, so the higher asset the bank's management were using the appropriate and
utilization, the capital must be increased. The results showed accurate procedure. As the result, the financing risk for the
that the CAR does not affect the PDM. The results showed that banks tend to be minor, these achievements always being
the higher the CAR does not necessarily affect the increase in maintained consequently. As a result, stakeholders begin to turn
PDM. It because of the large number of third party funds our attention to other variables which are beyond the models
collected comes from deposits but does not offset the additional that are considered to affect the PDM.
financing provided by the bank because of the precautionary The results showed that PBH has a significant negative
principle. effect on ROA. The first reason of the negative relationship
The results showed that OER has a significant negative between PBH to ROA is customer of the bank has got PBH not
effect on ROA. According Wibowo34 healthy banks have OER necessarily return the funds obtained from banks in the same
ratio less than 1, whereas less healthy banks have OER ratio of year. Second, because all customers are not necessarily
more than 1. The higher the cost of bank revenue, meaning less obedient to repay funds received from the bank. The results
efficient operations so that their income is getting smaller. The showed that PBH has a positive and significant on PDM. This
results showed that OER has a positive and significant effect on is because the level the share received by the customers will be
the PDM. It because the banks are trying to increase the scale very dependent on the amount of funds distributed in the form
of the business, such as adding new branches, distribution of of financing.
funds for investment activities such as placements with other C. Mediated Variable Test Causal Step Strategy
banks. Management policies due to maximize the revenue, Table 3 Mediated Variable Test Causal Step Strategy
therefore in this study the more effective management of third CAR on PDM a paths b paths c path c' path
party funds, the more funds will be distributed, the greater the Coefficient 0,0020 0,4759 0,0294 0,0284
OER and the PDM becomes larger. Sig 0,9103 0,0000 0,0193 0,0024
The results of the test indicate FDR has a significant OER on PDM a paths b paths c path c' path
negative effect on ROA. The results showed that the higher the Coefficient -0,0537 0,6268 -0,0101 0,0235
FDR does not necessarily affect the ROA because the amount Sig 0,0000 0,0000 0,1319 0,0001
of financing provided by banks is not matched by the increase FDR on PDM a paths b paths c path c' path
in the number of depositor funds. This causes the amount of Coefficient -0,0028 0,4775 -0,0018 -0,0004
receivables that have not been received reduces the cash, Sig 0,6659 0,0000 0,7041 0,9005
causing a negative correlation to profitability. The results Deposit on PDM a paths b paths c path c' path
showed that the FDR has a significant negative effect on the
PDM. The results occurred as management of bank does not Coefficient 0,0095 0,5029 -0,0144 -0,0192
distribute profits derived from the use of third party funds, it Sig 0,2701 0,0000 0,0190 0,0000
happens because banks are trying to increase the scale of the PJB on PDM a paths b paths c path c' path
business, such as adding new branches, distribution of funds for Coefficient 0,0198 0,5118 -0,0003 -0,0104
investment activities such as placements with other banks. Sig 0,0106 0,0000 0,9627 0,0173
Management policy to use income as additional funds for
operational activities and investments is due to avoid
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Adv. Sci. Lett. 23, 8, 2017 RESEARCH ARTICLE

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