Analyzing the impact of risk profile on financial performance in banks: Moderating effect of good corporate governance
DOI:
https://doi.org/10.12928/optimum.v15i2.13324Keywords:
Good corporate governance, Risk profile, Financial performanceAbstract
The restrictions on economic activity during the COVID-19 pandemic harmed banking stability in Indonesia. This is reflected in the decline in banks' financial performance in 2020 due to high losses on various risk profiles. These risks do not only occur under certain conditions, such as a pandemic, but are also inherent in the bank's business activities. Therefore, this study analyzes the impact of credit risk, operational risk, and liquidity risk on bank financial performance in 2019-2024, involving GCG as a moderating variable. The purpose of this analysis is to provide an overview of the quality of risk management in commercial banks in Indonesia. The object of this research is commercial banks listed on the IDX. The research sample consisted of 15 banks, selected through purposive sampling. The data were analyzed using panel data models and moderated regression (MRA). The results showed that credit risk and operational risk had a negative effect, while liquidity risk did not affect bank financial performance. GCG weakens the negative relationship between operational risk and financial performance, but does not moderate the relationship between credit risk and liquidity risk. The findings suggest that the risk management of commercial banks in Indonesia is suboptimal, particularly in terms of credit risk and operational risk. Tighter supervision by GCG is also necessary to mitigate the adverse effects of risk.
References
Ahmed, Z., Shakoor, Z., Khan, M. A., & Ullah, W. (2021). The role of financial risk management in predicting financial performance: A case study of commercial banks in Pakistan. Journal of Asian Finance, Economics and Business, 8(5), 639-648.
Al-Sharkas, A. A., & Al-Sharkas, T. A. (2022). The impact on bank profitability: Testing for capital adequacy ratio, cost-income ratio and non-performing loans in emerging markets. Journal of Governance and Regulation, 11(1 special issue), 231-243. https://doi.org/10.22495/jgrv11i1siart4
Ayinuola, T. F., & Gumel, B. I. (2023). The impact of cost-to-income ratio on bank performance in Nigeria. Accounting Journal, 5(2), 643-652.
Basuki, A. T., & Prawoto, N. (2019). Analisis Regresi Dalam Penelitian Ekonomi & Bisnis. PT Rajagrafindo Persada, Depok, 18, 1-52.
Bhattarai, B. P. (2019). Effect of credit risk management on financial performance of commercial banks in Nepal. European Journal of Accounting, Auditing and Finance Research, 7(5), 87-103.
Davydov, D., Vähämaa, S., & Yasar, S. (2021). Bank liquidity creation and systemic risk. Journal of Banking and Finance, 123. https://doi.org/10.1016/j.jbankfin.2020.106031
Dendawijaya, L. (2005). Manajemen Perbankan, Second edition. Penerbit Ghalia Indonesia.
Ekinci, R., & Poyraz, G. (2019). The effect of credit risk on financial performance of deposit banks in Turkey. Procedia Computer Science, 158, 979-987. https://doi.org/10.1016/j.procs.2019.09.139
Fadun, O. S., & Oye, D. (2020). Analysis of impacts of operational risk management practices on banks' financial performance: Study of selected commercial banks in Nigeria. International Journal of Finance & Banking Studies (2147-4486), 9(1), 22-35. https://doi.org/10.20525/ijfbs.v9i1.634
Frame, W. S., Lazaryan, N., McLemore, P., & Mihov, A. (2024). Operational loss recoveries and the macroeconomic environment: Evidence from the U.S. banking sector. Journal of Banking and Finance, 165(May), 107220. https://doi.org/10.1016/j.jbankfin.2024.107220
Gazi, M. A. I., Karim, R., Senathirajah, A. R. bin S., Ullah, A. K. M. M., Afrin, K. H., & Nahiduzzaman, M. (2024). Bank-specific and macroeconomic determinants of profitability of Islamic shariah-based banks: Evidence from new economic horizon using panel data. Economies, 12(3). https://doi.org/10.3390/economies12030066
Gyimah, P., & Owusu-Afriyie, R. (2025). Bank sustainability: Do corporate governance and internal audit quality matter? World Development Sustainability, 6(April), 100222. https://doi.org/10.1016/j.wds.2025.100222
Harini, A. R., Kurniawan, M. L. A., & Putra, B. J. (2024). Do macroeconomic variables affect deposits in shariah banks? Islamic Economics Journal, 10(1), 61-71. https://doi.org/10.21111/iej.v10i1.11611
Ikatan Bankir Indonesia. (2018). Manajemen Risiko 1 (4th ed.). PT Gramedia Pustaka Utama.
Ismail. (2018). Manajemen Perbankan: Dari Teori Menuju Aplikasi, 5th ed. Prenadamedia Group.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency cost and ownership structure. Journal of Financial Economics, 3, 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
Maghfiroh, R. D., Asandimitra, N., & Hartono, U. (2023). Moderation analysis of good corporate governance on the effect of financial ratio and market ratio on financial distress. International Journal of Professional Business Review, 8(7).https://doi.org/10.26668/businessreview/2023.v8i7.2933
Mashamba, T. (2018). The effects of Basel III liquidity regulations on banks' profitability. Journal of Governance and Regulation, 7(2), 34-48. https://doi.org/10.22495/jgr_v7_i2_p4
Muriithi, J. G., & Muigai, R. G. (2017). Quantitative analysis of operational risk and profitability of Kenyan commercial banks using cost income ratio. IOSR Journal of Economics and Finance, 8(3), 76-83. https://doi.org/10.9790/5933-0803047683
Muriithi, J. G., & Waweru, K. M. (2017). Liquidity risk and financial performance of commercial banks in Kenya. International Journal of Economics and Finance, 9(3), 256-265. https://doi.org/10.5539/ijef.v9n3p256
Nath, S. D., Biswas, M. R., Maleque, M. A., & Islam, M. . M. (2024). Effect of Basel III liquidity ratio LCR and NSFR on the profitability of commercial banks in Bangladesh. International Journal of Economics and Business Administration, XII(Issue 3), 12-28. https://doi.org/10.35808/ijeba/851
Nguyen, T. D. C., Phan, H. N., Le, H. S., Nguyen, T. T. T., & Petrov, A. (2020). Corporate governance and bank performance: A case of Vietnam banking sector. Journal of Security and Sustainability Issues, 10(2). https://doi.org/10.9770/jssi.2020.10.2(6)
Obadire, A. M., & Obadire, K. (2023). The impact of bank regulation on bank performance: A novel analysis of the pre-Covid era with cross-country evidence. American Journal of Industrial and Business Management, 13(03), 118-139. https://doi.org/10.4236/ajibm.2023.133009
Ogundele, O. S., & Nzama, L. (2025). Risk management practices and financial performance: Analysing credit and liquidity risk management and disclosures by Nigerian banks. Journal of Risk and Financial Management, 18(4). https://doi.org/10.3390/jrfm18040198
Otoritas Jasa Keuangan. (2016a). Peraturan Otoritas Jasa Keuangan Nomor 18 /POJK.03/2016 Tentang Penerapan Manajemen Risiko Bagi Bank Umum. Otoritas Jasa Keuangan.
Otoritas Jasa Keuangan. (2016b). Surat Edaran Otoritas Jasa Keuangan Nomor 24/SEOJK.03/2016 Tentang Perhitungan Aset Tertimbang Menurut Risiko Untuk Risiko Operasional Dengan Menggunakan Pendekatan Indikator Dasar. Otoritas Jasa Keuangan.
Otoritas Jasa Keuangan. (2016c). Surat Edaran Otoritas Jasa Keuangan Nomor 42/SEOJK.03/2016 Tentang Pedoman Perhitungan Aset Tertimbang Menurut Risiko Untuk Risiko Kredit Dengan Menggunakan Pendekatan Standar. Otoritas Jasa Keuangan.
Otoritas Jasa Keuangan. (2019). Buku 2 Perbankan. sikapiuangmu.ojk.go.id.
Rahman, H., Yousaf, M. W., & Tabassum, N. (2020). Bank-specific and macroeconomic determinants of profitability: A revisit of Pakistani banking sector under dynamic panel data approach. International Journal of Financial Studies, 8(3), 1-19. https://doi.org/10.3390/ijfs8030042
Sidhu, A. V., Rastogi, S., Gupte, R., & Bhimavarapu, V. M. (2022). Impact of liquidity coverage ratio on performance of select Indian banks. Journal of Risk and Financial Management, 15(5). https://doi.org/10.3390/jrfm15050226
Sunecher, Y., & Dookhy, N. S. (2025). Risk management in the banking sector of Mauritius. Journal of Central Banking Law and Institutions, 4(2), 387-402. https://doi.org/10.21098/jcli.v4i2.311
Widodo, A., & Kurniawan, M. L. A. (2018). Comparing credit procyclicality in conventional and islamic rural bank: Evidence from Indonesia. Al-Tijary: Jurnal Ekonomi Dan Bisnis Islam, 3(1), 87-105. https://doi.org/10.21093/at.v3i1.808
Yeasin, H. M. (2023). Empirical study of the impact of liquidity risk on the financial performance: a study of selected commercial banks in Bangladesh. Journal of Financial Markets and Governance, 2(1), 87-110. https://doi.org/10.54728/JFMG-202209-00059
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Dewi Sri Maulydia, Ririt Iriani Sri Setiawati
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
