The Role of CAR as a Mediating Variable in the Impact between NPF and FDR on ROA of Islamic Banks

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Discussion

This analysis finds CAR mediates the NPF-ROA relationship in Islamic banks, indicating its importance in financial performance.

Results demonstrate that NPF negatively impacts CAR and directly reduces ROA.
CAR fully mediates the relationship between NPF and ROA, accounting for 67.2% of CAR variance.
The study employs Partial Least Squares Structural Equation Modelling on quarterly financial data from Indonesian Islamic banks.
Findings emphasize the importance of asset quality over liquidity metrics in Islamic bank strategies.

Rahmawati et al. (2025) studied this question.

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