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Earnings growth, marketability and the role of Islamic financial literacy and inclusion in Indonesia

Ahmad Abbas (Department of Sharia and Islamic Business Economics, Sekolah Tinggi Agama Islam Negeri Majene, Majene, Indonesia)
Neks Triani (Department of Accounting, Universitas Sembilanbelas November Kolaka, Kolaka, Indonesia)
Wa Ode Rayyani (Department of Accounting, Universitas Muhammadiyah Makassar, Makassar, Indonesia)
Muchriana Muchran (Department of Accounting, Universitas Muhammadiyah Makassar, Makassar, Indonesia)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 20 December 2022

52

Abstract

Purpose

This paper aims to describe earnings growth and marketability generated by Islamic banks in Indonesia and to find the effects of a moderated mediation model on the nexus between Islamic financial inclusion and literacy, marketability and earnings growth.

Design/methodology/approach

The sample of this research was Islamic commercial banks in Indonesia listed on the Financial Services Authority and Bank Indonesia using time-series data of financial statements from 2014 to 2021. This research was designed using the model of moderated mediation.

Findings

Earnings growth experienced by Islamic banks in Indonesia has a positive average value followed by a positive marketability. Based on the significance test, the level of earnings growth is positively affected by marketability. The result indicates that the higher the marketability, the higher the earnings growth of Islamic banks. In a moderated mediation model, the result has found a positive effect on the nexus between inclusion supported by the role of literacy, marketability and earnings growth. It indicates that Islamic financial inclusion moderated purely by the role of literacy enhances Islamic banking marketability so that earnings growth continuously increases.

Practical implications

The increase of literacy is an empirically proven way to strengthen market power, so the finding obtained in this research can be feedback from the scheme made by the Indonesian government in supporting the Islamic business and for the corporate area being eager to grow greater and faster in competing and equalizing its power in the banking industry. In addition, this research implies that other countries continuously promote and increase the role of Islamic financial literacy and inclusion to enhance market power and increase the growth in Islamic banking.

Originality/value

This research extends the limited scholarly work on the role of Islamic financial literacy and inclusion using a different design from prior studies. The framework of market power theory has been elaborated to find the effect of Islamic financial inclusion supported by the role of literacy on earnings growth through marketability. This research is a trailblazer in testing the nexus model between variables allowing the path analysis using the moderated mediation model.

Keywords

Acknowledgements

This paper was the best selected paper and invited to be presented in Islamic Finance and Economic Research Forum in 2019 (FREKS 2019) held by Financial Services Authority (OJK) collaborated with Indonesian Association of Islamic Economist (IAEI). The authors thank Dr Md Nazim Uddin, A Post-Doctoral Fellow from Ankara University Turkey, for assistance in the process of accomplishment and proofreading of this paper.

Citation

Abbas, A., Triani, N., Rayyani, W.O. and Muchran, M. (2022), "Earnings growth, marketability and the role of Islamic financial literacy and inclusion in Indonesia", Journal of Islamic Accounting and Business Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-12-2021-0322

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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