DETERMINANTS OF ISLAMIC BANKS’ FINANCIAL PERFORMANCE: LEVERAGE, FIRM SIZE, AND CORPORATE SOCIAL RESPONSIBILITY PERSPECTIVES

Abstract

The development of the Islamic banking industry in Indonesia has shown significant growth; however, the expansion of the industry has not always been followed by stable financial performance. This study aims to examine the effect of leverage, firm size, and Islamic Corporate Social Responsibility (ICSR) on the financial performance of Islamic Commercial Banks in Indonesia. This research employs a quantitative approach using secondary data obtained from annual reports and sustainability reports of 10 Islamic Commercial Banks during the 2021-2025  period. The data were analyzed using panel data regression with the Random Effect Model (REM) approach through EViews 10. The results indicate that leverage has a positive and significant effect on financial performance measured by Return on Assets (ROA). Firm size also has a positive and significant effect, suggesting that larger asset capacity and operational scale enhance banks’ ability to improve profitability. Furthermore, Islamic Corporate Social Responsibility (ICSR) has a positive and significant effect on financial performance, indicating that the implementation of Islamic-based social responsibility can strengthen stakeholder trust and support banking profitability. Simultaneously, leverage, firm size, and ICSR significantly influence the financial performance of Islamic Commercial Banks in Indonesia. This study contributes to Islamic finance literature by integrating financial structure factors and Islamic social responsibility dimensions to explain the determinants of Islamic banking performance