Do Political Risks Influence Sharia Bank Stability? The Case of Southeast Asia

Rahmawati, Zulfa Muasaroh Binti, Miranti, Titis ORCID: https://orcid.org/0000-0002-8720-3809, Oktaviana, Ulfi Kartika ORCID: https://orcid.org/0000-0002-5222-4423 and Kornitasari, Yenny (2025) Do Political Risks Influence Sharia Bank Stability? The Case of Southeast Asia. Shirkah: Journal of Economics and Business, 10 (2). pp. 294-311. ISSN p-ISSN: 2503-4235 e-ISSN: 2503-4243

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Abstract

To address a gap in the literature which has largely focused on other regions like the Middle East and North Africa, this study examines the influence of political risk on the stability of Sharia banks in Southeast Asia, a region characterized by rapid economic growth alongside significant political uncertainties. This study employs a quantitative methodology, utilizing panel data regression with a Fixed Effects Model to analyze data from 17 of the largest Sharia banks in Southeast Asia over the period of 2018-2022, obtained from the annual financial reports of these banks. The key findings indicate that political risk has a significant negative impact on the stability of Sharia banks in the region. In contrast, the quality of regulation and the total assets of the banks were found to have a significant positive influence on their stability. Other internal factors, such as the Capital Adequacy Ratio (CAR), Non-Performing financing (NPF),Financing to Deposit Ratio (FDR), and Return on Assets (ROA), did not show a statistically significant effect on bank
stability in the context of this study. This study provides valuable insights for academics, bankers, and government authorities by emphasizing that Southeast Asian policymakers and regulators must actively manage political risks and continuously improve financial regulations to ensure the stability of the Sharia banking sector.

Item Type:	Journal Article
Keywords:	Bank Stability; Political risk; Sharia Banks; Southeast Asia
Subjects:	14 ECONOMICS > 1402 Applied Economics > 140207 Financial Economics 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment > 150203 Financial Institutions (incl. Banking) 15 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 1502 Banking, Finance and Investment
Divisions:	Faculty of Economics > Department of Islamic Banking
Depositing User:	Titis Miranti
Date Deposited:	01 Dec 2025 10:49

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