Macroeconomic and Firm-Specific Effects on Islamic Deposits Sustainability

Authors

  • Sazana Ab Rahman Islamic Business School, Universiti Utara Malaysia, 06010 Sintok, Kedah
  • Nor Hayati Ahmad Islamic Business School, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia
  • Noraziah Che Arshad Islamic Business School, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia

DOI:

https://doi.org/10.59953/paperasia.v40i2b.84

Keywords:

Islamic deposits, Bank deposit, Least Square Dummy Variables (LSDV)

Abstract

Integrating ESG (Environmental, Social, and Governance) principles into Islamic finance presents opportunities for aligning financial activities with sustainable and ethical considerations. While there are challenges and areas for improvement, the potential synergies and shared principles between ESG and Islamic finance provide a promising avenue for sustainable and socially responsible investment within Islamic finance. However, past studies have not thoroughly researched key aspects of Islamic finance, such as the sustainability concerns of Islamic deposits, their interaction with macroeconomic variables, and their particular impacts on firms. Therefore, this study aims to examine the macroeconomic and firm-specific effects on the sustainability of Islamic deposits. The sample in this study consists of 13 Islamic banks in Malaysia. The data period covers from 2018 until Quarter 3 of 2022. The data type is cross-sectional from secondary sources: Islamic banks' financial reports, Bank Negara Malaysia, Department of Statistics of Malaysia, and the World Bank. This study adopts a quantitative analysis approach using one dependent variable (Islamic deposits), three independent variables (gross domestic product, inflation, overnight policy rate), and one control variable (firm-specific). An estimated model using the panel data correlation and regression with the fixed effects model was conducted to test the developed hypotheses. Then, the panel data regression analysis continues with the Least Square Dummy Variable (LSDV), which includes the control variable to test the presence of the firm-specific effects. The findings show that only one macroeconomic factor, inflation, affects how well Islamic deposits are sustained. It is also evidenced by the findings that firm-specific effects impact the sustainability of Islamic deposits.

Downloads

Published

2024-03-11

How to Cite

Ab Rahman, S., Ahmad, N. H., & Che Arshad, N. (2024). Macroeconomic and Firm-Specific Effects on Islamic Deposits Sustainability . PaperASIA, 40(2b), 12–19. https://doi.org/10.59953/paperasia.v40i2b.84