Islamic banking (Participation banking) development and performance evaluation: Turkey and Malaysia example

There is no doubt that banks play a vital role in the economy of all countries. Stability of economy depends basically on banks' well-performance within a country. The paper analysis how bank characteristics and the overall financial environment affect the performance indicators of İslamic banks in Malaysia and Turkey from 2000 to 2015. Avariety of internal and external banking characteristics were used to predict profitability and efficiency. It also investigates the relationships between bank-specific and macroeconomic characteristics with the bank profitability by using data 12 İslamic banks from these two countries. According to the descriptive statistics in this research, İslamic banks in Turkey had performed better on the Return on Equity (ROE) and Management Quality (LDR); While the Malaysian İslamic banks had performed better on Capital Adequacy (TETA), Earning Quality (ERR) and Return on assets (ROA). With the help of Eviews program version 8.1, correlation and regression analysis were carried out to investigate the impact of Capital Adequacy (CAR), Management quality (LDR), Earning quality (ERR), Liquidity (LAR), Bank size (BSİZE), Gross Domestic Product (GDP), İnflation Rate (İNF) ve Dummy variable on major profitability i.e... Return on Assets (ROA) and Return on Equity (ROE). The empirical results had shown that, most of the independent variables have a strong impact on the profitability (dependent variables). Keywords: İslamic Banking Development, Performance Evaluation, Financial Ratios, Profitability Determinants, Dependent Variables.