Financial structure, digital transformation, and profitability islamic banks: The role of mediating operational efficiency in southeast asian context
##plugins.themes.bootstrap3.article.sidebar##
Published:
Mar 30, 2026
Keywords:
Digital Transformation, Financial Structure, Islamic Banking, Operational Efficiency, Profitability
Section
Articles
Statistics Article
Article View : 50 Times
##plugins.themes.bootstrap3.article.main##
Abstract
This research investigates to analyze the influence of financial structure and digital transformation on the profitability of Islamic banks with operational efficiency as a mediation variable. Previous studies have generally examined the determinants of profitability separately, so empirical evidence on the simultaneous role of these two factors through operational efficiency in Islamic banks in Southeast Asia is limited. This study uses a quantitative approach with descriptive and associative design. The sample was determined through purposive sampling of 19 Islamic banks in Southeast Asia during the period 2020–2024, resulting in 95 company year observations. Data analysis was carried out using panel data regression. The results show that financial structure has a negative and significant effect on operational efficiency and profitability, while digital transformation has a positive and significant effect on both. Operational efficiency mediates the effect of financial structure on profitability, but not the effect of digital transformation. Theoretically, this study enriches the literature on Islamic banking profitability by emphasizing the role of operational efficiency as a crucial mechanism linking financial structure and bank performance.
##plugins.themes.bootstrap3.article.details##
How to Cite
Amin, A., Nianty, D. A., & Romadhoni, B. (2026). Financial structure, digital transformation, and profitability islamic banks: The role of mediating operational efficiency in southeast asian context. Indonesia Accounting Research Journal, 13(3), 226–235. https://doi.org/10.35335/iacrj.v13i3.608
References
Al-Dmour, H. H., Asfour, F., Al-Dmour, R., & Al-Dmour, A. (2020). The effect of marketing knowledge management on bank performance through fintech innovations: A survey study of Jordanian commercial banks. Interdisciplinary Journal of Information, Knowledge, and Management, 15, 203. https://doi.org/https://doi.org/10.28945/4619
Alam, M. K., Rahman, M. M., Runy, M. K., Adedeji, B. S., & Hassan, M. F. (2022). The influences of Shariah governance mechanisms on Islamic banks performance and Shariah compliance quality. Asian Journal of Accounting Research, 7(1), 2–16. https://doi.org/https://doi.org/10.1108/AJAR-11-2020-0112
Alnajjar, A., & Othman, A. H. A. (2021). The impact of capital adequacy ratio (CAR) on Islamic banks� performance in selected MENA countries. International Journal of Business Ethics and Governance, 116–133. https://doi.org/10.51325/ijbeg.v4i2.70
Amin, A., Hala, Y., & Rinaldy, S. (2023). Profit Leveling Actions in Banking in terms of Profitability, Company Size and Capital Structure. Al-Buhuts, 19(2), 209–220. https: //doi.org/10.30603/ab.v19i2.4273
Anis, I., Gani, L., Fauzi, H., Hermawan, A. A., & Adhariani, D. (2023). The sustainability awareness of banking institutions in Indonesia, its implication on profitability by the mediating role of operational efficiency. Asian Journal of Accounting Research, 8(4), 356–372. https: //doi.org/10.1108/AJAR-06-2022-0179
Ayodeji, D. C., Oyeyipo, I., Nwaozomudoh, M. O., Isibor, N. J., Obianuju, E., & Onwuzulike, C. (2024). Modeling the Future of Finance: Digital Transformation, Fintech Innovations, Market Adaptation, and Strategic Growth. World Journal of Innovation and Modern Technology, 8(6). https: //doi.org/10.56201/ijssmr.v8.no1.2022.pg32.40
Bouzidi, F. M., & Nefzi, A. A. (2024). The impact of foreign bank entry on the efficiency and sustainability of domestic banks in developing countries: A meta-frontier approach. Sustainability, 16(24), 10932. https: //doi.org/10.3390/su162410932
Chen, T., Luo, H., Wang, P., Yin, X., & Yang, J. (2023). The role of pre-class and in-class behaviors in predicting learning performance and experience in flipped classrooms. Heliyon, 9(4). https: //doi.org/10.1016/j.heliyon.2023.e15234
Faqera, A. F., Waemustafa, W., Md Jadi, D., Al-Matari, E. M., Bajary, A. R., & Bin-Nashwan, S. A. (2025). The interplay of financial risk and governance mechanisms in shaping banks’ performance: evidence from major banks in the UAE. Corporate Governance: The International Journal of Business in Society. https: //doi.org/10.1108/CG-10-2024-0515
Ghenimi, A., Chaibi, H., & Omri, M. A. (2025). How capital structure affects Islamic and conventional bank profitability: the role of diversification. Asian Journal of Accounting Research, 1–17. https: //doi.org/10.1108/AJAR-02-2025-0050
Guizani, M., & Ajmi, A. N. (2022). Islamic banking and corporate investment efficiency: empirical evidence from Malaysia. International Journal of Productivity and Performance Management, 71(5), 1854–1871. https: //doi.org/10.1108/IJPPM-06-2020-0331
Islamic Finance Development Indicator. (2024). https://icd-ps.org/
Jardak, M. K., & Ben Hamad, S. (2022). The effect of digital transformation on firm performance: evidence from Swedish listed companies. The Journal of Risk Finance, 23(4), 329–348. https://doi.org/10.1108/JRF-12-2021-0199
Liu, L., Zhang, J. Z., He, W., & Li, W. (2021). Mitigating information asymmetry in inventory pledge financing through the Internet of things and blockchain. Journal of Enterprise Information Management, 34(5), 1429–1451. https://doi.org/10.1108/JEIM-12-2020-0510
Mashamba, T., & Chikutuma, C. N. (2023). Determinants of bank profitability: evidence from the emerging economy. Corporate and Business Strategy Review, 4(4), 310–323. https: //doi.org/10.22495/cbsrv4i4siart12
Monika, A., Azam, A. N., & Teguh, S. I. (2021). The impact of Fintech development to profitability of Islamic bank. International Journal of Research and Review, 8(1), 250–258. https://doi.org/10.52403/ijrr.20210128
MORTADZA, N. S., PURWANINGSIH, Y., TRINUGROHO, I., MULYANINGSIH, T. R. I., & HAKIM, L. (2024). Interplay of Institutional Quality, Efficiency, and Stability in The Islamic Banking Sector of Malaysia. International Journal of Economics & Management, 18(1). https://doi.org/10.47836/ijeam.18.1.05
Nastiti, N. D., & Kasri, R. A. (2019). The role of banking regulation in the development of Islamic banking financing in Indonesia. International Journal of Islamic and Middle Eastern Finance and Management, 12(5), 643–662. https://doi.org/10.1108/IMEFM-10-2018-0365
Nguyen, Q. T. T., Ho, L. T. H., & Nguyen, D. T. (2023). Digitalization and bank profitability: evidence from an emerging country. International Journal of Bank Marketing, 41(7), 1847–1871. https://doi.org/10.1108/IJBM-03-2023-0156
Odhiambo, J. D., Murori, C. K., & Aringo, C. E. (2025). Financial leverage and firm performance: An empirical review and analysis. East African Finance Journal, 4(1), 25–35. https://doi.org/10.59413/eafj/v4.i1.2
Oteri, O. J., Onukwulu, E. C., Igwe, A. N., Ewim, C. P.-M., Ibeh, A. I., & Sobowale, A. (2023). Cost optimization in logistics product management: strategies for operational efficiency and profitability. International Journal of Business and Management. Forthcoming. https://doi.org/10.54660/.IJMRGE.2023.4.1-852-860
Rehman, A. U., Aslam, E., & Iqbal, A. (2022). Intellectual capital efficiency and bank performance: Evidence from islamic banks. Borsa Istanbul Review, 22(1), 113–121. https://doi.org/10.1016/j.bir.2021.02.004
Saif-Alyousfi, A. Y. H. (2022). Determinants of bank profitability: evidence from 47 Asian countries. Journal of Economic Studies, 49(1), 44–60. https://doi.org/https://doi.org/10.1108/JES-05-2020-0215
Sayari, S. (2024). Driving Digital Transformation: Analyzing the Impact of Internet Banking on Profitability in the Saudi Arabian Banking Sector. Journal of Risk and Financial Management, 17(5), 174. https://doi.org/10.3390/jrfm17050174
Shaikh, S. A. (2021). Using Fintech in scaling up Islamic microfinance. Journal of Islamic Accounting and Business Research, 12(2), 186–203. https://doi.org/10.1108/JIABR-10-2019-0198
Shen, C., Wu, J., Li, Y., & Chen, Q. (2025). Does digital transformation improve the cost efficiency of commercial banks? Evidence from China. Finance Research Letters, 73, 106619. https://doi.org/10.1016/j.frl.2024.106619
Singh, S., & Srivastava, R. K. (2020). Understanding the intention to use mobile banking by existing online banking customers: an empirical study. Journal of Financial Services Marketing, 25(3), 86–96. https://doi.org/10.1057/s41264-020-00074-w
Theiri, S., & Hadoussa, S. (2024). Digitization effects on banks’ financial performance: the case of an African country. Competitiveness Review: An International Business Journal, 34(1), 144–162. https://doi.org/10.1108/CR-10-2022-0147
Tlemsani, I., Zaman, A., Mohamed Hashim, M. A., & Matthews, R. (2025). Digitalization and sustainable development goals in emerging Islamic economies. Journal of Islamic Accounting and Business Research, 16(5), 890–914. https://doi.org/10.1108/JIABR-03-2023-0092
Valaskova, K., Nagy, M., & Juracka, D. (2025). Digital transformation and financial performance: an empirical analysis of strategic alignment in the digital age. Journal of Enterprising Communities: People and Places in the Global Economy. https://doi.org/10.1108/JEC-11-2024-0241
Wang, Z., Lin, S., Chen, Y., Lyulyov, O., & Pimonenko, T. (2023). Digitalization effect on business performance: role of business model innovation. Sustainability, 15(11), 9020. https://doi.org/10.3390/su15119020
Yamin, B. (2022). The Effect of Return on Asset (ROA), Operational Efficiency Ratio (BOPO), Inflation, Credit Interest Rate and Gross Domestic Product (GDP) towards Murabahah Financing in Sharia Banking in Indonesia (2016-2019). Asian Journal of Economics, Business and Accounting, 22(19), 94–103. https://doi.org/10.9734/ajeba/2022/v22i1930661
Alam, M. K., Rahman, M. M., Runy, M. K., Adedeji, B. S., & Hassan, M. F. (2022). The influences of Shariah governance mechanisms on Islamic banks performance and Shariah compliance quality. Asian Journal of Accounting Research, 7(1), 2–16. https://doi.org/https://doi.org/10.1108/AJAR-11-2020-0112
Alnajjar, A., & Othman, A. H. A. (2021). The impact of capital adequacy ratio (CAR) on Islamic banks� performance in selected MENA countries. International Journal of Business Ethics and Governance, 116–133. https://doi.org/10.51325/ijbeg.v4i2.70
Amin, A., Hala, Y., & Rinaldy, S. (2023). Profit Leveling Actions in Banking in terms of Profitability, Company Size and Capital Structure. Al-Buhuts, 19(2), 209–220. https: //doi.org/10.30603/ab.v19i2.4273
Anis, I., Gani, L., Fauzi, H., Hermawan, A. A., & Adhariani, D. (2023). The sustainability awareness of banking institutions in Indonesia, its implication on profitability by the mediating role of operational efficiency. Asian Journal of Accounting Research, 8(4), 356–372. https: //doi.org/10.1108/AJAR-06-2022-0179
Ayodeji, D. C., Oyeyipo, I., Nwaozomudoh, M. O., Isibor, N. J., Obianuju, E., & Onwuzulike, C. (2024). Modeling the Future of Finance: Digital Transformation, Fintech Innovations, Market Adaptation, and Strategic Growth. World Journal of Innovation and Modern Technology, 8(6). https: //doi.org/10.56201/ijssmr.v8.no1.2022.pg32.40
Bouzidi, F. M., & Nefzi, A. A. (2024). The impact of foreign bank entry on the efficiency and sustainability of domestic banks in developing countries: A meta-frontier approach. Sustainability, 16(24), 10932. https: //doi.org/10.3390/su162410932
Chen, T., Luo, H., Wang, P., Yin, X., & Yang, J. (2023). The role of pre-class and in-class behaviors in predicting learning performance and experience in flipped classrooms. Heliyon, 9(4). https: //doi.org/10.1016/j.heliyon.2023.e15234
Faqera, A. F., Waemustafa, W., Md Jadi, D., Al-Matari, E. M., Bajary, A. R., & Bin-Nashwan, S. A. (2025). The interplay of financial risk and governance mechanisms in shaping banks’ performance: evidence from major banks in the UAE. Corporate Governance: The International Journal of Business in Society. https: //doi.org/10.1108/CG-10-2024-0515
Ghenimi, A., Chaibi, H., & Omri, M. A. (2025). How capital structure affects Islamic and conventional bank profitability: the role of diversification. Asian Journal of Accounting Research, 1–17. https: //doi.org/10.1108/AJAR-02-2025-0050
Guizani, M., & Ajmi, A. N. (2022). Islamic banking and corporate investment efficiency: empirical evidence from Malaysia. International Journal of Productivity and Performance Management, 71(5), 1854–1871. https: //doi.org/10.1108/IJPPM-06-2020-0331
Islamic Finance Development Indicator. (2024). https://icd-ps.org/
Jardak, M. K., & Ben Hamad, S. (2022). The effect of digital transformation on firm performance: evidence from Swedish listed companies. The Journal of Risk Finance, 23(4), 329–348. https://doi.org/10.1108/JRF-12-2021-0199
Liu, L., Zhang, J. Z., He, W., & Li, W. (2021). Mitigating information asymmetry in inventory pledge financing through the Internet of things and blockchain. Journal of Enterprise Information Management, 34(5), 1429–1451. https://doi.org/10.1108/JEIM-12-2020-0510
Mashamba, T., & Chikutuma, C. N. (2023). Determinants of bank profitability: evidence from the emerging economy. Corporate and Business Strategy Review, 4(4), 310–323. https: //doi.org/10.22495/cbsrv4i4siart12
Monika, A., Azam, A. N., & Teguh, S. I. (2021). The impact of Fintech development to profitability of Islamic bank. International Journal of Research and Review, 8(1), 250–258. https://doi.org/10.52403/ijrr.20210128
MORTADZA, N. S., PURWANINGSIH, Y., TRINUGROHO, I., MULYANINGSIH, T. R. I., & HAKIM, L. (2024). Interplay of Institutional Quality, Efficiency, and Stability in The Islamic Banking Sector of Malaysia. International Journal of Economics & Management, 18(1). https://doi.org/10.47836/ijeam.18.1.05
Nastiti, N. D., & Kasri, R. A. (2019). The role of banking regulation in the development of Islamic banking financing in Indonesia. International Journal of Islamic and Middle Eastern Finance and Management, 12(5), 643–662. https://doi.org/10.1108/IMEFM-10-2018-0365
Nguyen, Q. T. T., Ho, L. T. H., & Nguyen, D. T. (2023). Digitalization and bank profitability: evidence from an emerging country. International Journal of Bank Marketing, 41(7), 1847–1871. https://doi.org/10.1108/IJBM-03-2023-0156
Odhiambo, J. D., Murori, C. K., & Aringo, C. E. (2025). Financial leverage and firm performance: An empirical review and analysis. East African Finance Journal, 4(1), 25–35. https://doi.org/10.59413/eafj/v4.i1.2
Oteri, O. J., Onukwulu, E. C., Igwe, A. N., Ewim, C. P.-M., Ibeh, A. I., & Sobowale, A. (2023). Cost optimization in logistics product management: strategies for operational efficiency and profitability. International Journal of Business and Management. Forthcoming. https://doi.org/10.54660/.IJMRGE.2023.4.1-852-860
Rehman, A. U., Aslam, E., & Iqbal, A. (2022). Intellectual capital efficiency and bank performance: Evidence from islamic banks. Borsa Istanbul Review, 22(1), 113–121. https://doi.org/10.1016/j.bir.2021.02.004
Saif-Alyousfi, A. Y. H. (2022). Determinants of bank profitability: evidence from 47 Asian countries. Journal of Economic Studies, 49(1), 44–60. https://doi.org/https://doi.org/10.1108/JES-05-2020-0215
Sayari, S. (2024). Driving Digital Transformation: Analyzing the Impact of Internet Banking on Profitability in the Saudi Arabian Banking Sector. Journal of Risk and Financial Management, 17(5), 174. https://doi.org/10.3390/jrfm17050174
Shaikh, S. A. (2021). Using Fintech in scaling up Islamic microfinance. Journal of Islamic Accounting and Business Research, 12(2), 186–203. https://doi.org/10.1108/JIABR-10-2019-0198
Shen, C., Wu, J., Li, Y., & Chen, Q. (2025). Does digital transformation improve the cost efficiency of commercial banks? Evidence from China. Finance Research Letters, 73, 106619. https://doi.org/10.1016/j.frl.2024.106619
Singh, S., & Srivastava, R. K. (2020). Understanding the intention to use mobile banking by existing online banking customers: an empirical study. Journal of Financial Services Marketing, 25(3), 86–96. https://doi.org/10.1057/s41264-020-00074-w
Theiri, S., & Hadoussa, S. (2024). Digitization effects on banks’ financial performance: the case of an African country. Competitiveness Review: An International Business Journal, 34(1), 144–162. https://doi.org/10.1108/CR-10-2022-0147
Tlemsani, I., Zaman, A., Mohamed Hashim, M. A., & Matthews, R. (2025). Digitalization and sustainable development goals in emerging Islamic economies. Journal of Islamic Accounting and Business Research, 16(5), 890–914. https://doi.org/10.1108/JIABR-03-2023-0092
Valaskova, K., Nagy, M., & Juracka, D. (2025). Digital transformation and financial performance: an empirical analysis of strategic alignment in the digital age. Journal of Enterprising Communities: People and Places in the Global Economy. https://doi.org/10.1108/JEC-11-2024-0241
Wang, Z., Lin, S., Chen, Y., Lyulyov, O., & Pimonenko, T. (2023). Digitalization effect on business performance: role of business model innovation. Sustainability, 15(11), 9020. https://doi.org/10.3390/su15119020
Yamin, B. (2022). The Effect of Return on Asset (ROA), Operational Efficiency Ratio (BOPO), Inflation, Credit Interest Rate and Gross Domestic Product (GDP) towards Murabahah Financing in Sharia Banking in Indonesia (2016-2019). Asian Journal of Economics, Business and Accounting, 22(19), 94–103. https://doi.org/10.9734/ajeba/2022/v22i1930661
Copyright and Licensing
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.