The Influence of Risk Management, Third-Party Funds and Capital Structure on Banking Sector Financial Performance in Indonesia and Thailand with Corporate Governance as Moderating Variable in 2015-2019

Nurtika Ekawati, Unggul Purwohedi and Ari Warokka
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Nurtika Ekawati: Jakarta State University, Jakarta, Indonesia
Unggul Purwohedi: Jakarta State University, Jakarta, Indonesia
Ari Warokka: Jakarta State University, Jakarta, Indonesia

Oblik i finansi, 2021, issue 4, 71-80

Abstract: The banking sector plays an important role in the country's economic growth. International experience shows that a weak banking sector not only threatens the long-term stability of a country's economy. It can also cause a financial crisis which can lead to economic crisis. Therefore, it is important to identify and investigate the factors on which the financial performance of banks depends. The purpose of this study is to analyze the influence of risk management, third-party funds and capital structure on banking sector financial performance in Indonesia and Thailand with corporate governance as moderating variable. The authors use return on assets (ROA) as the key indicator of bank efficiency. The data used in this study are secondary data, including nonperforming loan (NPL), loan-to-deposit ratio (LDR), operating expenses to operating income (BOPO), net interest margin (NIM), third party funds (TPF), debt-to-equity ratio (DER), return on assets (ROA), corporate governance. The data was obtained from the official website of the Indonesia Stock Exchange (www.idx.co.id) and the Thai Stock Exchange (www.set.or.th). The sample used in this study is 20 conventional banks listed on the Indonesia and Thailand Stock Exchange from 2015-2019. The methodological basis of this study is the use of the Structural Equation Model (SEM) with Partial Least Square (PLS). Data processing was performed in the WarpPLS 7.0 software. The study results show that NPL and LDR have a negative and significant influence on the financial performance of banks. At the same time, the BOPO and DER do not affect the financial performance of banks. The NIM and TPF have a significant and positive influence on the bank's financial performance. In addition, corporate governance does not moderate risk management relationship to the bank's financial performance. The results of this study can benefit bank shareholders and customers, and bank management.

Keywords: nonperforming loan; loan-to-deposit ratio; ratio of operating expenses and operating income; net interest margin; third party funds; debt-to-equity ratio; return on assets; corporate governance; banking sector (search for similar items in EconPapers)
JEL-codes: G21 G29 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:iaf:journl:y:2021:i:4:p:71-80

DOI: 10.33146/2307-9878-2021-4(94)-71-80

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