Dynamic Model of Islamic Bank Profitability.

Analysis of profitability determinants will contribute in increasing Islamic bank profitability. This research aims to analyse Islamic bank profitability determinants in the short and long run. It uses data of Indonesian Islamic banking. It applies dynamic model of Error Correction Model (ECM) to find several internal and external factors that influence Islamic bank profitability in the short and long run. This research shows that Total Financing becomes dominant variable in the short run and has positive effect. In the long run, Loan Loss Provision becomes dominant variable but has negative effect. Mark Up Financing has significant influence in the short and long run, but Equity Financing only has significant influence in the long run. Surprisingly, this research indicates that Equity Financing has stronger influence than Mark Up Financing in the long run. [ABSTRACT FROM AUTHOR]