CHAPTER III

RESEARCH METHOD

A. Research Method

1. Research Type

The research type used in this research is quantitative approach.

Quantitative approach is a research method that is based on the

philosophy of positivism, used to examine a population or a specific

sample, data collection using research instruments, quantitative/statistical

data analysis, with the aim to describe and test hypotheses that have been

set (Sugiyono, 2017: 15). Quantitative research is research based on

quantitative data where quantitative data is data in the form of numbers

(Suliyanto, 2018: 20). This research is carried out to examine the effect

of Profit Sharing-Based Financing and Trading-Based Financing towards

the Profitability of Islamic Commercial Banks which moderated by Non-

Performing Financing.

2. Population and Sample

The population is a generalization area that consists of objects or

subjects that have certain quantities and characteristics determined by

researchers to research and draw conclusions (Sugiyono, 2017: 130). The

population is the whole element whose characteristics are to be assumed

(Suliyanto, 2018: 177). The population in this research are all Islamic

Commercial Banks registered at the OJK from 2013 to 2018. So that the

population in this research consist of 14 Islamic Commercial Banks.

The sample is part of the number and characteristics possessed by the

population. The sampling technique in this research is nonprobability

sampling, which is a sampling technique that does not provide the same

opportunity or opportunity for each element or member of the population

selected to be the sample. The technique used is purposive sampling,

which is the technique of determining the sample with certain

considerations (Sugiyono, 2017: 131-138). The considerations or criteria

used in selecting a sample are as follows:

a. Islamic Commercial Banks registered in OJK respectively for the

period 2013-2018.

b. Islamic Commercial Bank which publishes annual reports on their

website or other official websites for the 2013-2018 period.

c. Islamic Commercial Bank which its annual reports present data on

Profit Sharing Based Financing, Trading Based Financing, Return on

Assets and Non-Performing Financing during the 2013-2018 period.

d. Islamic Commercial Bank which discloses data relating to variables

used in research.
From these criteria, a sample with the following details is obtained:

Table 6. Sample Selection Process

Not Fulfilling Fulfilling
No. Criteria Total
Criteria Criteria
1. Islamic Commercial Banks 14 3 11
registered in OJK
respectively for the period
2013-2018.
2. Islamic Commercial Bank 11 - 11
which publishes annual
reports on their official
websites for the 2013-2018
period.
3. Present data on Profit 11 6 5
Sharing Based Financing,
Trading Based Financing,
ROA and NPF during the
2013-2018 period.
Total of Islamic Banks being sampled 5
Total of data for the period 2013-2018 30

From the total 14 Islamic Commercial Banks in Indonesia of 2018, the

amount of Islamic Commercial Bank registered OJK in a row for the

2013-2018 period consist of 11 Islamic Commercial Banks. From the

total 11 Islamic Commercial Banks, there are 6 Islamic Commercial

Banks that do not contain istishna financing in their annual reports. So

Islamic Commercial Banks that meet the criteria to be sampled are five

Islamic Commercial Banks with a research period of six years so that the

amount of research samples are 30 samples.

List of Islamic Commercial Banks that has fulfilled the criteria and

becomes the research sample are presented in the table:

 Table 7. List of Research Samples
No Name of Islamic Website
. Commercial Bank
1. Bank Muamalat Indonesia https://www.bankmuamalat.co.id/
2. BRI Syariah https://www.brisyariah.co.id/
3. Bank Jabar Banten Syariah http://www.bjbsyariah.co.id/
4. Bank Mandiri Syariah https://www.mandirisyariah.co.id/
5. Bank Bukopin Syariah https://www.syariahbukopin.co.id/

3. Type and Sources of Data

The type of data used in this research is secondary data. Secondary

data is data obtained indirectly from research subjects that have been

collected and presented by other parties both for commercial and non-

commercial purposes (Suliyanto, 2018: 156). Secondary data is obtained

in finished form and has been processed by other parties, usually in the

form of publications (Sudaryono, 2014: 7).

The data in this research according to the time of data collection

consists of cross section data and time series data. Cross section data is

data collected at a certain time on several objects to describe the

situation. While time series data is data collected from time to time on

an object to describe the situation (Suliyanto, 2018: 161).

The data is obtained from annual reports of Islamic Commercial

Banks registered in the Otoritas Jasa Keuangan and has met the sample

criteria. Information data examined are mudharabah financing,

musyarakah financing, murabahah financing, istishna financing, ROA

and NPF published in annual reports of Islamic commercial bank and

 obtained through the websites of each Islamic commercial bank in

Indonesia which publish its annual reports for 2013-2018.

4. Data Collection Techniques

Data collection techniques in this research using documentation

methods, namely by collecting, tabulating, and summarizing the data

needed for research. The data is traced through the official website of

each Islamic Commercial Banks in Indonesia which publish their annual

report for 2013-2018.

B. Conceptual Definition and Operational Variables

Research variable is an attribute or nature or value of people, objects,

organizations or activities that have certain variations determined by

researchers to be researched and then drawn conclusions (Sugiyono, 2017:

57). Variables are characteristics of research objects whose values vary from

one subject to another or from one time to another (Suliyanto, 2018: 124).

The variables in this research consist of one dependent variable, two

independent variables, and one moderation variable.

1. Dependent Variable

The dependent variable is a variable that is affected or which becomes

a result, because of the independent variable (Sugiyono, 2017: 57). The

dependent variable in this research is the profitability of Islamic

commercial banks as measured in Return on Assets (ROA).

 Profitability ratios are ratios to assess a company's ability to seek

profits. This ratio also provides a measure of the effectiveness of a

company's management and shows the company's efficiency (Kasmir,

2019: 198). Return on Assets (ROA) is a ratio used to measure the

effectiveness of management in managing the amount of profit obtained

by banks. ROA is used to determine the ability of banks to manage assets

to generate maximum profits (Sudarsono, 2017). ROA is the ratio

between profit before tax and total assets (Bank Indonesia, 2011). This

variable is measured from the value of the ROA ratio at Islamic

commercial banks for 2013-2018.

ROA can be calculated using the following formula:

Earnings Before Tax

ROA=
Average Total Asset

Earnings Before Tax is profit as recorded in the profit and loss of the

bank in the current year as regulated in the applicable provisions about

Monetary Stability Reports and Monthly Financial System Islamic

Commercial Banks and Business Units Average Total Assets is the

average total assets in the Financial Position Report as stated in the

Monetary Stability Report and Monthly Financial System of Islamic

Commercial Banks and Islamic Business Units (Otoritas Jasa Keuangan,

2014).
2. Independent Variables

Independent variables are variables that influence or are the cause of

changes or the existence of the dependent variable (Sugiyono, 2017: 57).

This research has two independent variables, these are Profit-Sharing

Based Financing (PSBF) which includes mudharabah financing and

musyarakah financing, and Trading Based Financing (TBF) which

includes murabahah financing and istishna financing. The independent

variables in this research are explained in the following description:

a. Profit-Sharing Based Financing (PSBF)

The independent variable Profit Sharing Based Financing (PSBF) in

this research is the proportion of mudharabah financing and

musyarakah financing to the total amount of all financing at Islamic

Commercial Banks in the period 2013-2018.

1) Mudharabah Financing

Mudharabah is a contract of business cooperation between

shahibul maal (owner of funds) and mudarib (fund manager)

with a profit-sharing ratio according to the agreement in

advance. If the business suffers a loss, then all losses will be

borne by the owner of the fund, except if there are a negligence

or mistakes by the fund manager, such as fraud and misuse of

funds (Ikatan Akuntan Indonesia, 2008). This variable is

measured by the amount of mudharabah financing that will be

 compared into the total financing at Islamic commercial banks

for 2013-2018.

2) Musyarakah Financing

Musyarakah is an agreement of cooperation between two or

more parties to a specific business, in which each party

contributes funds provided that the profits generated will be

divided based on the agreement, while the losses will be borne

by the partners in accordance with the contribution of funds

(Hery, 2018: 18). This variable is measured by the amount of

musyarakah financing that will be compared into the total

financing at Islamic commercial banks for 2013-2018.

b. Trading Based Financing (TBF)

The independent variable Trading Based Financing (TBF) in this

research is a proportion of murabahah financing and istishna

financing to the total amount of all financing at Islamic Commercial

Banks in the period 2013-2018.

1) Murabahah Financing

Murabahah is the sale of goods to declare the acquisition

price and profit (margin) as agreed upon by the seller and the

buyer. The seller must disclose the amount of the principal price

and the desired profit. Buyers and sellers can bargain on the

amount of profit margins until an agreement is reached

 (Nurhayati, 2017: 174). This variable is measured by the amount

of murabahah financing that will be compared into the total

financing at Islamic commercial banks for 2013-2018.

2) Istishna Financing

Istishna is a sale and purchase agreement in the form of an

order to make certain goods, with certain criteria and conditions

agreed between the buyer and seller. The seller will prepare

goods ordered according to agreed specifications, where the

seller can prepare themself or through another party called

istishna parallel (Hery, 2018: 66). This variable is measured by

the amount of istishna financing that will be compared into the

total financing at Islamic commercial banks for 2013-2018.

3. Moderation Variable

The moderating variable is a variable that influences (strengthens or

weakens) the relationship between the independent variable and the

dependent variable (Sugiyono, 2017: 58). The moderating variable in this

research is Non-Performing Financing (NPF). NPF is the amount of

financing with substandard, doubtful, and loss financing quality

distributed by commercial banks. NPF ratio calculation is done by

comparing the total NPF to the total financing of commercial bank (Bank
 Indonesia, 2015). This variable is measured from the value of the NPF

ratio at Islamic banks for 2013-2018.

C. Data Analysis Techniques

1. Outlier Test

The outlier test is a data screening step to detect the presence of

outliers. According to Ghozali (2018: 40), outliers are cases or data that

have unique characteristics that look very different from other

observations and appear in the form of extreme values for either a single

variable or a combination variable. Outliers come from populations that

we take as samples but the distribution of variables in these populations

has extreme values and is not normally distributed.

Detection of univariate outliers can be done by determining the

boundary value that will be categorized as outlier data or commonly

called z-score, which has means (average) equal to zero and standard

deviation equal to one. For the case of small samples less than 80, the

standard score with a value of ≥ 2.5 is declared an outlier (Ghozali,

2018: 40).

The outlier test in this research carried out by using data from the

2013-2018 Islamic Commercial Bank financial statements that met the

sample criteria. Data that met the criteria should consist the component

of Profit Sharing Based Financing (PSBF), Trading Based Financing

(TBF), Non Performing Financing (NPF) and Return on Asset (ROA).

2. Descriptive Statistics Analysis

Descriptive statistics are statistics used to analyze data by describing

data that has been collected as it is without intending to make

conclusions that apply to the public or generalization (Sugiyono, 2017:

226). Descriptive analysis is used to describe a variable such as average

number, standard deviation, lowest value and the highest value (Bahri,

2018: 157). Descriptive statistical analysis in this research use data from

Islamic commercial banks financial statements that have met the sample

criteria for 2013-2018.

3. Panel Data Analysis

Panel data is data collected from several objects (cross-section) with

some time (time series). A cross-section is data collected from several

objects at one time. Time series is data collected from time to time on

one object (Suliyanto, 2011: 230). Panel data analysis are needed in this

research because data in this research consist of cross sectional data and

time series data. Cross sectional data proven by number of samples

which consist of five different objects of Islamic Commercial Banks.

Time series data proven by data used in this research come from Islamic

Commercial Banks annual report from 2013 to 2018.

According to Widarjono (2009: 231), there are three approaches to

estimating the regression model with panel data, namely:

a. Fixed Coefficient Between Time and Individuals (Common Effect)

 The common effect estimation method is the simplest estimation

method because it only combines time series data with cross-sections

without looking at differences between time and individuals.

Common effect estimation uses the Ordinary Least Square (OLS)

method (Widarjono, 2009: 231).

The common effect method assumes that the intercept and slope

are the same between time and company, so this assumption is far

from the actual reality because each company has different

characteristics (Widarjono, 2009: 232).

b. Constant Slope But Different Intercepts Between Individuals (Fixed

Effect)

The fixed effect method is a technique for estimating panel data

using dummy variables (cross-sectional units) to capture the

presence of intercept differences (Suliyanto, 2011: 233). The fixed

effect technique is based on intercept differences between companies

but the intercept is the same between time (time-invariant). This

model also assumes that the regression coefficient (slope) remains

between time and between companies (Widarjono, 2009: 233).

c. Estimation with Random Effect Approach

The random effect model estimates panel data where interruption

variables may be interconnected between time and individuals.

Unlike the fixed effect that reflects individual differences and time

through intercepts, the random effect model reflects differences in

 time and individuals through error terms. This model takes into

account that errors may correlate across time series and cross-

sections. There are two components that have contributed to the

formation of errors, namely individual and time, therefore random

errors in the random effect model also need to be broken down into

errors for individual components and errors for time components.

The random effect model is often referred to as the Error Component

Model (ECM) and the proper method for estimating this model is

Generalized Least Squares (GLS) (Widarjono, 2009: 243).

According to Widarjono (2009: 238), there are three tests used to

determine the most appropriate technique for estimating panel data

regression. First, the F statistical test is used to choose between OLS

methods without dummy variables or Fixed Effect. Second, the

Lagrange Multiplier (LM) test is used to choose between OLS without

dummy variables or Random Effects. Third, the Hausman test to choose

between Fixed Effect or Random Effect.

a. Common Effect or Fixed Effect with F Test

Statistical F test is a two regression difference test to find out

whether panel data regression techniques with Fixed Effect are

better than panel data regression models without dummy variables

(Common Effect) by looking at Residual Sum of Squares (RSS)

(Widarjono, 2009: 238).

( RSS1−RSS 2)/m
F=
(RSS¿¿ 2)/(n−k ) ¿
Note:

RSS1 = Residual sum of a square without dummy variable

(Common Effect)

RSS2 = Residual sum of a square with fixed effect technique with

a dummy variable

m = Number of restrictions

n = Number of observations

k = Number of parameters in the fixed effect model

The first hypothesis is that the intercept is the same. The

calculated F statistical value will follow the F statistical distribution

with degrees of freedom (df) as many as m for the numerator and

as much as n-k for the denumerator. M is the number of restrictions

or restrictions in the model without a dummy variable. To find out

that the fixed effect technique is better than the assumption of the

same coefficient (common effect), it can be seen from the RRS

value with the F test (Widarjono, 2009: 238).

1) If Farithmetic > Ftable then Ho is rejected, meaning the most

appropriate model to use is a fixed effect

2) If Farithmetic < Ftable then Ho is accepted, meaning the most

appropriate model to use is the common effect

b. Common Effect Test or Random Effect with Lagrange Multiplier

Test Lagrange Multiplier

Test (LM) is a test used to find out whether the random effect

model is better than the common effect. Breusch-Pagan is a person

who developed a random effect significance test. The Breusch-

Pagan method for testing the significance of the random effect

model is based on the residual value of the OLS method. LM test is

based on the distribution of chi-squares with degrees of freedom a

number of independent variables (Widarjono, 2009: 239)

[ ]
n

nT
∑ ( T e 1) 2
i=1
LM = n T
−1
2 ( T −1 )
∑ ∑ ei 2

i=1 t=1

Information:

n = number of individuals

T = number of time periods

e = residual method of Common Effect (OLS)

Lagrange Multiplier test criteria (Widarjono, 2009: 239):

1) If the LM statistical value > chi-square critical statistical value

then Ho is rejected, it means that the right estimate is the

random effect method.

 2) If the statistical LM value < chi-square statistical value, then

Ho is accepted, it means that the right estimate is the common

effect method.

c. Fixed Effect Test or Random Effect with the Hausman Test

The Hausman test is a formal test that has been developed to

choose between the fixed effect test or the random effect test.

Hausman's test is based on the idea that both OLS and GLS

methods are consistent but OLS is inefficient in the null hypothesis.

On the other hand, alternative hypotheses are OLS consistent and

GLS inconsistent. Therefore the first hypothesis test is that the

estimation results of the two are not different so that the Hausman

test can be done based on differences in these estimates. Hausman

test statistics follow the chi-square statistical distribution with a

degree of freedom of k which is the number of independent

variables (Widarjono, 2009: 240).

−1
m=q Var (q) q

Hausman test statistics follow the Chi-Square statistical

distribution with a degree of freedom of k where k is the number of

independent variables.Hausman test criteria (Widarjono, 2009:

240), namely:

1) If the Hausman statistical value > of its critical value, then the

hypothesis Ho is rejected, meaning that the right model is the

 fixed effect model.

2) If the Hausman statistical value < of its critical value, then the

hypothesis Ho is accepted, meaning that the right model is the

random effect model.

4. Classical Assumption Test

The classic assumption test is performed so that the data used in the

research meets the criteria of the Best Linear Unlock Estimator

(BLUE). The BLUE criterion can be achieved if it meets the classic

assumption requirements (Bahri, 2018: 161). The classic assumption

testing consists of:

a. Normality Test

A normality test is conducted to determine whether the data

to be analyzed for distribution is normally distributed or not

(Sugiyono and Susanto, 2015: 321). According to Ghozali (2018:

161), the normality test aims to test whether, in the regression

model, confounding or residual variables follow the normal

distribution. The normality test will be carried out with graph

analysis and statistical analysis. If the residual data distribution is

normal, then the line that represents the actual data will follow the

diagonal line. According to Bahri (2018: 165) the normality test is

based on the Kolmogorov-Smirnov (KS) test, the residuals are

normally distributed if the significance value is more than 0.05

(Sig ≥ 0.05).
b. Multicollinearity Test

According to Ghozali (2018: 107) multicollinearity test aims

to test whether the regression model found a correlation between

independent variables. A good regression model should not occur

the correlation between independent variables. Multicollinearity

can be seen from the value of tolerance and its opponent Variance

Inflation Factor (VIF) with the following provisions:

1) If the tolerance value ≤ 0.10 or VIF value ≥ 10 indicates the

presence of multicollinearity

2) If the tolerance value ≥ 0.10 or VIF value ≤ 10 indicates the

absence of multicollinearity

c. Heteroscedasticity Test

Heteroscedasticity is a residual variance that is not the same

in all observations in the regression model (Bahri, 2018: 180).

Good regression should not occur heteroscedasticity.

Heteroscedasticity test aims to test whether in the regression

model there is an inequality of variance from the residuals of one

observation to another. If the variance from one observation

residual to another observation is fixed, then it is called

Homoscedasticity and if different is called Heteroscedasticity

(Ghozali, 2018: 137).

d. Autocorrelation Test
 According to Ghozali (2018: 111), the autocorrelation test

aims to test whether in the linear regression model there is a

correlation between the error of the intruder in the t period and the

error of the intruder in the t-1 period (before). If there is a

correlation, it is called an autocorrelation problem. A good

regression model is a regression that is free from autocorrelation.

The autocorrelation test can be done with the Durbin-Watson Test

(DW Test) approach. The Durbin Watson test is used for first-

order autocorrelation and requires an intercept in the regression

model and there is no lag variable between the independent

variables. Hypothesis tested:

Ho: no autocorrelation (r = 0)

Ha: there is autocorrelation (r ≠ 0)

Table 8. List of Autocorrelation Decision Making

Hypothesis Nul Decision Criteria
No positive autocorrelation Decline 0 < d < dl
No positive autocorrelation No decision dl ≤ d ≤ du
No negative autocorrelation Decline 4-dl < d < 4
No negative autocorrelation No decision 4-du ≤ d ≤ 4-dl
No autocorrelation, positive or Not Declined du < d < 4-du
negative
Source: Ghozali (2018:112)

5. Moderated Regression Analysis (MRA)

Moderating variables are independent variables that will strengthen or

weaken the relationship between the independent variable and the

dependent variable (Ghozali, 2018: 221). Moderated regression

 analysis is a special application of multiple linear regression where the

regression equation contains interaction elements, namely the

multiplication of two or more independent variables (Bahri, 2018:

206). The MRA equation is stated as follows:

Y = α0 + α1X1 + α2X2 + e

Y =α0 + α1X1 + α2X2 + α3X1*Z + α4X2*Z e

Description:

Y = Profitability (ROA)

α0 = constant

α1 = regression coefficient of Profit-Sharing Based Financing (PSBF)

α2 = regression coefficient of Trading Based Financing (TBF)

α3 = moderation regression coefficient of Profit-Sharing Based

Financing (PSBF)

α4 = moderation regression coefficient of Trading Based Financing

(TBF)

X1 = Profit Sharing Based Financing (PSBF)

X2 = Trading Based Financing (TBF)

Z = Non-Performing Financing (NPF)

e = standard error e

6. The goodness of Fit Model

The goodness of fit test is used to measure the accuracy of the

sample regression function in estimating the actual value (Bahri,

2018: 192). Statistical calculations are called statistically significant if

the statistical test value is in a critical area (the area where H o is

rejected), otherwise, it is called insignificant when the statistical test is

in the area where Ho was received (Ghozali, 2018: 97). The goodness

of fit test can be done through:

a. Coefficient of Determination

The coefficient of determination (R2) aims to measure how far

the model's ability to explain variations in the dependent variable.

The coefficient of determination is between 0-1. If R 2 value is

small means ability of independent variables in explaining the

variation is very limited dependent variables. A value close to one

means that the independent variables provide almost all the

information needed to predict variations in the dependent variable

(Ghozali, 2018: 97). The coefficient of determination in this

research is measured by the value of Adjusted R-Square because

this research consists of more than one independent variable

(Bahri, 2018: 192).

b. Statistical Test F

According to Bahri (2018: 193), the statistical test F is used to

test the hypotheses of all the independent variables entered in the

model together to influence the dependent variable and also to

 determine the feasibility of the regression model. Hypothesis

tested:

Ho: independent variables do not affect dependent variable (ρ= 0)

Ha: independent variables affect dependent variable (ρ ≠ 0)

Decision-making criteria in the F statistical test are stated as

follows:

1) Test the level of significance

With a significance level or α of 5% (0.05) then:

a) If the significance value ≥ 0.05 then Ho received and Ha

rejected, meaning that the independent variables together

no effect on the dependent variable.

b) If the significance value ≤ 0.05 then Ho is rejected and Ha

is accepted, meaning that the independent variables

jointly influence the dependent variable.

2) Comparison of the calculated F value and the value of F table

a) If Farithmetic ≤ Ftable, then Ho is accepted and Ha is rejected,

meaning that the independent variables together do not

affect the dependent variable.

b) If Farithmetic ≥ Ftable, then Ho is rejected and Ha is accepted,

meaning that the independent variables jointly influence

the dependent variable.

c. Statistical Test t
 According to Bahri (2018: 194), t statistical test is used to test

the hypothesis of the influence of individual independent

variables on the dependent variable. Hypothesis tested:

Ho: independent variable does not have positive effect on

dependent variable (ρ = 0)

Ha: independent variable has positive effect on dependent variable

(ρ ≠ 0)

The decision-making criteria in the t statistical test are stated as

follows:

1) Test the level of significance

With a significance level or α of 5% (0.05) then:

a) If the significance value ≥ 0.05 then Ho received and Ha

rejected, meaning that the independent variables

individually do not affect the dependent variable.

b) If the significance value ≤ 0.05 then H o is rejected and

Ha is accepted, meaning that the independent variable is

individually and significantly influences the dependent

variable.

2) Comparison of the calculated t value and t table value

a) If the tarithmetic ≥ ttable, then Ho is rejected and Ha is

accepted, meaning that the independent variable

influences the dependent variable.

b) If tarithmetic ≤ ttable, then Ho is accepted and Ha is rejected,

meaning that the independent variable does not affect the

dependent variable.