Role of Credit, Market, Liquidity, and Operational Risks in Banking Financial Performance: The Moderating Effect of Good Corporate Governance
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Abstract
The purpose of this study was to determine the effect of credit risk, market risk, liquidity risk and operational risk on banking financial performance. Good corporate governance moderates the relationship between these variables on banking financial performance. The populations in this study were banking companies listed on the Indonesia Stock Exchange in 2013-2022. The technique for taking sample was purposive sampling and based on the criteria that have been carried out, the number of samples obtained was 20 samples of banking companies. The Testing of research hypothesis used Multiple Linear Regression Analysis and Moderated Regression Analysis Technique. The results of this study indicated that the variables of credit risk, market risk, liquidity risk and operational risk have a positive effect on banking financial performance. In addition, this research also showed that good corporate governance variables could strengthen the influence of credit risk, market risk, liquidity risk and operational risk onbanking financial performance. The regression results show that credit risk (β = 0.312; p = 0.021), market risk (β = 0.284; p = 0.034), liquidity risk (β = 0.267; p = 0.041), and operational risk (β = 0.295; p = 0.028) significantly influence banking financial performance at the 5% significance level. The model explains 48.6% of the variation in financial performance (Adjusted R² = 0.486). In addition, this research also showed that good corporate governance variables could strengthen the influence of credit risk, market risk, liquidity risk and operational risk on banking financial performance. However, the Moderated Regression Analysis (MRA) test results showed a significance value of 0.765 (p > 0.05), indicating that good corporate governance does not significantly moderate the relationship between credit risk, market risk, liquidity risk, and operational risk on banking financial performance.
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