Islamic bank profit-loss sharing financing and earnings volatility

Titi Dewi Warninda, Rofikoh Rokhim, Irwan Adi Ekaputra

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


Profit-loss sharing (PLS) financing comprises Musharakah and Mudarabah ought to be the main form of Islamic banks' financing. However, based on Southeast Asia, South Asia, and the Middle East Islamic banks' data, this research shows that the proportion of PLS financing is still deficient compared to debt financing. Moreover, it shows that only Musharakah financing displays a significant linear and nonlinear (inverse U-shape) association with Islamic bank earnings volatility. The empirical estimates suggest that earnings volatility is maximized when the proportions of Musharakah financing is about 31%. Increasing this type of financing beyond 31% may lower earnings volatility.

Original languageEnglish
Pages (from-to)229-239
Number of pages11
JournalPertanika Journal of Social Sciences and Humanities
Issue numberS2
Publication statusPublished - 1 Jan 2019


  • Earnings volatility
  • Islamic banks
  • Mudarabah financing
  • Musharakah financing


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