Spin-off Decision and Profitability: Evidence from Indonesia Islamic Banking Industry

Purpose: This study aims to investigate the impact of spin-off decisions on the profitability of Indonesian Islamic banks. Design/methodology/approach: Employing a dynamic panel system GMM estimator, we analyze semi-annual un-balanced panel data of 35 Islamic banks from 2007 to 2023. Findings: The findings suggest that spin-off decisions do not significantly influence the profitability of Islamic banks. However, economic growth positively impacts profitability, while financing risk and world oil prices neg-atively affect it. Islamic bank liquidity and inflation exhibit no significant impact on profitability. Research limitations/implications: The study is limited to the Indonesian context. Further research could explore the impact of spin-offs on other performance metrics and in different economic environments. The findings suggest that a reevaluation of the spin-off policy outlined in Indonesia Law 21/2008 and 4/2023 may be necessary, and that Islamic banks should focus on strengthening their resilience against macroeconomic shocks. Originality/value: While previous research has examined the impact of various factors on Islamic bank profitability, the influence of the spin-off policy remains inconclusive. This study aims to contribute to the literature by inves-tigating the combined effects of the spin-off decision and other macroeconomic variables, especially oil prices, on the profitability of Indonesian Islamic banks.