Abstract:

This research investigates the effects of risk preferences and good corporate governance on cost efficiency of Islamic Banks. This paper investigates the Islamic Banking listed on the Indonesia Financial Service Authority during the period 2010-2014. The cost efficiency score is measured using Stochastic Frontier Approach (SFA) and the hypothesis is tested using regression method. The result shows that the solvency and liquidity have positive effects on the efficiency of the Islamic Banks. However, financing quality, good corporate governance (GCG) have no significant effect on the cost efficiency of the Islamic Banks. It indicates that banks’ management reacts positively to maintain the ability to meet all its obligations by improving the efficiency.