RISK MANAGEMENT, CORPORATE GOVERNANCE, AND FINANCIAL PERFORMANCE: EVIDENCE FROM INDONESIAN COMMERCIAL BANKS (2020–2024)

Abstract

This study examines the effects of risk management and corporate governance on the financial performance of Indonesian commercial banks. Unlike prior studies that examine risk management and corporate governance separately, this study integrates both dimensions within a unified empirical framework to explicitly capture their joint influence on bank profitability. Using balanced panel data from 43 banks listed on the Indonesia Stock Exchange over 2020–2024 (215 firm-year observations), this study employs panel regression with a Random Effects Model. Financial performance is proxied by return on assets (ROA). Risk management and corporate governance are represented by key indicators reflecting credit risk, market risk, liquidity risk, and corporate governance. The results show that asset quality and leverage discipline are critical determinants of bank profitability, as credit risk, financial leverage, and board size negatively and significantly affect ROA, while bank size has a positive and significant effect, whereas other risk buffers and governance attributes are insignificant. These findings highlight that bank profitability in Indonesia is more strongly associated with asset quality, leverage discipline, operational scale, and board efficiency than with other risk buffers and formal governance attributes. The study provides practical implications for bank management in strengthening credit risk control and capital structure discipline, and for regulators in emphasizing governance effectiveness to support sustainable bank performance.