How’s the Environmental Disclosure Index, Economic Growth, and Inflation Enhance the Banking Performance? In the Context of Listed Islamic Banks of Saudi Arabia.

Abstract

This research explains applied methods, current techniques, challenges, and future development agendas related to Islamic commercial banking and their performance factors. This article examines the connection between the performance of publicly traded Islamic commercial banks in Saudi Arabia and the performance factors such as return on assets, return on equity, and net profit. The methodology consists of a time series annual analysis. The content analysis is used to collect information from annual reports of ten listed Islamic commercial banks of Saudi Arabia on the Tadawul stock exchange from 2013 to 2022. The influencing factors are regressed with banking performance to check the banking performance using the autoregressive distributed lag model (ARDL) for short- and long-run estimators with the ARDL bound testing technique. The results interpret that bank size and GDP increase profitability metrics, while higher credit, inflation, and environmental disclosure negatively affect bank performance indicators in the long run. However, GDP, credit, and environmental disclosure have slight negative effects, suggesting volatility in the short term. Furthermore, governments and policymakers concentrated on environmental contribution and disclosure by the banking sector for a sustainable environment and banking performance.