Determinants of Bank Performance with Corporate Governance as Moderator

Abstract

This study utilizes a quantitative methodology to investigate multiple factors affecting the financial performance of banks listed on the Indonesia Stock Exchange (IDX) during the 2021-2023 period. A particular focus is placed on assessing the role of Good Corporate Governance (GCG) as a moderating variable in these relationships. Utilizing a purposive sampling technique, researchers carefully chose 20 representative companies from a larger pool of 47. This approach ensures that the selected companies reflect key characteristics relevant to the study, This enables a more focused analysis of the determinants of financial performance specific to the banking industry. Using Moderated Regression Analysis (MRA), this study examined the interplay of capital structure, liquidity risk, and governance. Findings show a strong positive relationship between capital structure and financial performance, while liquidity risk demonstrates a significant negative effect on profitability. Furthermore, the moderation analysis presents a nuanced view of GCG. Although GCG does not strengthen the relationship between capital structure and performance, it is crucial in enhancing how effective liquidity risk management contributes to a bank's financial stability and performance.