The Effects of Asset Spread and Good Corporate Governance on Profit Distribution Management in Indonesian Islamic Commercial Banks

Mismiwati; Riduwansah; Rika Lidyah

doi:10.61255/jeemba.v4i4.1462

Authors

Mismiwati Universitas Islam Negeri Raden Fatah Palembang
Riduwansah Universitas Islam Negeri Raden Fatah Palembang
Rika Lidyah Universitas Islam Negeri Raden Fatah Palembang

DOI:

https://doi.org/10.61255/jeemba.v4i4.1462

Keywords:

Asset Spread, Displaced Commercial Risk, Good Corporate Governance, Islamic Commercial Banks, Profit Distribution Management

Abstract

Purpose : This study aims to examine the relationship between Asset Spread, Good Corporate Governance (GCG), and Profit Distribution Management (PDM) in Islamic Commercial Banks in Indonesia during the 2020–2025 period. The study specifically investigates whether Asset Spread and governance mechanisms are associated with banks’ profit distribution practices, while considering the potential relevance of Displaced Commercial Risk (DCR) as a theoretical perspective.

Design/Methodology/Approach : This study employs a quantitative approach using secondary data from eight Islamic Commercial Banks in Indonesia selected through purposive sampling. The study utilizes a balanced panel dataset consisting of 48 bank-year observations. The empirical analysis is conducted using a Two-Way Fixed Effects (TWFE) model with bank-clustered robust standard errors. Robustness tests are performed by incorporating additional control variables, including the Capital Adequacy Ratio (CAR), Non-Performing Financing (NPF), and Financing-to-Deposit Ratio (FDR).

Findings : The findings indicate that Asset Spread has a statistically significant negative relationship with Profit Distribution Management, while Good Corporate Governance does not demonstrate a statistically significant relationship with PDM. The negative association between Asset Spread and PDM remains consistent across alternative model specifications after including additional control variables. These results suggest that Displaced Commercial Risk may provide a relevant theoretical explanation for understanding how banks’ return-generating capacity relates to profit distribution practices; however, the findings do not establish a causal relationship.

Originality/Value : This study contributes to the literature by positioning Asset Spread as a potential explanatory factor for Profit Distribution Management and examining it alongside a composite measure of Good Corporate Governance within an integrated economic and governance framework. Furthermore, this study highlights the limitation of composite GCG self-assessment scores in capturing governance dimensions that may be more directly relevant to profit distribution decisions in Islamic banking.

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