THE EFFECT OF CORE CAPITAL, QUALITY OF GOVERNANCE IMPLEMENTATION ON THE PROFITABILITY OF RURAL BANKS IN KALIMANTAN WITH CREDIT RISK AS A MEDIATION VARIABLE
Main Article Content
Budi Rahman
Irene Rini Demi Pangestuti
Rural banks (BPR) have an important role in supporting financial inclusion, especially in remote areas. This study examines the effect of core capital and governance quality on profitability with credit risk as a mediating variable at BPRs in Kalimantan during the period 2016–2023. Using quantitative methods with secondary data, the research sample consisted of 51 BPRs with 326 observations after outlier adjustment. The analysis was conducted with SPSS 26.0 using path analysis two-fold regression. The results of the study show that the first regression shows that core capital has a significant negative effect on credit risk (sig. 0.002; coefficient -0.172), the quality of governance implementation as measured by the decrease in the value of the governance composite has a significant positive effect on increasing credit risk (sig. 0.086; coefficient 0.094). The second regression shows that core capital has a significant positive effect on profitability (ROA) (sig. 0.023; coefficient 0.112), while the quality of governance implementation as indicated by the decrease in the value of the governance composite is not significant (sig. 0.338; coefficient 0.115). Credit risk was found to have a significant negative effect on profitability (sig. 0.000; coefficient -0.368). The Sobel test shows that credit risk is able to mediate the relationship between core capital and profitability (sig. 0.00380 < 0.10; Coef 0.063), and credit risk can also mediate the relationship between the quality of governance implementation and profitability (sig. 0.0933 < 0.10; Coef -0.034).
Adi Surahmat, Mukhzarudfa, and Yudi. (2020). Comparison of Financial Performance of Rural banks (BPR) Before and After the Implementation of Governance in Jambi Province. VOL. 5 NO. 4 (2020): Journal of Accounting & Finance, University of Jambi
Afriyanto, F., Purnamawati, H., Sukiman, I. (2021). The Effect of Capital Adequacy Ratio (CAR) and Loan to Deposit Ratio (LDR) On Non Performing Loan (NPL) (Case Study on Conventional Commercial Banks In Indonesia on 2016-2020). Proceedings of the 3rd Seminar on Social Politics, Business, Accounting and Engineering (SoBAT) Bandung, October 16, 2021 ISBN 978-623-92199-2-5
Ajayi, S., Ajayi, H., Enimola, D., Orugun, F. (2019). Effect of Capital Adequacy Ratio (CAR) on Profitability of Deposit Money Banks (DMB's): A Study of DMB's with International Operating License in Nigeria. Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online).
Andrey Zagorcheva, Lei Gao. (2015). Corporate governance and performance of financial institutions. Journal of Economics and Business, 2015, vol. 82, issue C, 17-41
Banna, H., & Alam, Z. (2021). Impact of credit risk on financial stability and profitability of banks in Southeast Asia. Asian Journal of Finance and Accounting, 13(4), 89–101. https://doi.org/10.1108/AJFA-2021-06-027
Barus, A., C., Erick, (2016), Analysis of Factors Affecting Non Performing Loans in Commercial Banks in Indonesia. Jurnal Wira Ekonomi Mikroskil, Vol. 6 no. 02, pp. 113-122.
Berger, A.N., & Bouwman, C.H.S. (2013). How does capital affect bank performance during financial crises? Journal of Financial Economics, 109(1), 146–176. https://doi.org/10.1016/j.jfineco.2013.02.008
Bhattarai, Y.R. (2016). Capital Structure and Firm Performance: Evidence from Nigeria. Journal for Studies in Management and Planning, 2(3), 138–150
Chen, Y., Lu, J., & Sougiannis, T. (2022). Corporate governance and firm performance: Evidence from banking. Journal of Corporate Finance, 72, 102143. https://doi.org/10.1016/j.jcorpfin.2021.102143
Dendawijaya, Lukman. (2009). Banking Management. (Second Edition). Jakarta: Ghalia Indonesia.
Désiré Kanga, Victor Murinde, and Issouf Soumaré. (2020). Capital, risk and profitability of WAEMU banks: Does bank ownership matter?. Journal of Banking & Finance 114(6):105814
Dewi, L., Herawati, N., Sulindawati, LGE (2015). Analysis of the Influence of NIM, BOPO, LDR and NPL on Profitability. EJournal S1 Ak. (1), 466–469.
Evi Dwi Jayanti and Farahiyah Sartika (2021). The Effect of Capital Adequacy and Credit Distribution on Profitability with Credit Risk as a Moderating Variable. Journal of Accounting and Finance, Faculty of Economics, Islamic State University of Maulana Malik Ibrahim, Malang Volume 18 No 4.
Ghozali, Imam. 2006. Multivariate Analysis Application with SPSS Program. (4th Edition). Semarang: Diponegoro University Publishing Agency
Haziro, W, BG, & P, NN (2017). The Influence of Audit Committee Characteristics on Financial Distress of Indonesian Banking. ITS Science and Arts Journal, 6(1), 32–36.
Hery. 2015. Financial Report Analysis. Yogyakarta: CAPS (Center for. Academic Publishing Service).
Jensen, M., C., and W. Meckling, 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure", Journal of Finance Economics 3:305-360, downloaded from
Judisseno, Rimsky K (2005). Monetary and Banking Systems in Indonesia. Jakarta: PT Gramedia Pustaka Utama.
Kaihatu, TS 2006. Good Corporate Governance and Its Implementation in Indonesia. Journal of Management and Entrepreneurship, Vol. 8, No.1: 1-9, March.
Kasidi. "Risk Management". Ghalia Indonesia, Bogor. 2010.
Kidane, S.T. (2020). The effect of credit risk on profitability of commercial banks in Ethiopia. African Journal of Economic Policy, 27(2), 25–40. https://doi.org/10.1080/13504851.2020.175157
Komang Hevy Aryani. (2019). The Influence of Good Corporate Governance on Banking Profitability with Credit Risk as an Intervening Variable (On Banks Listed on the IDX for the Period 2014-2016. Journal VOL. 7 NO. 1 (2019): DISTRIBUTION - MARCH 2019
Kusuma, E., C., Haryanto, A., M. (2016). Analysis of the Influence of Bank Performance Variables (CAR, ROA, BOPO and LDR), as well as Credit Growth and Credit Quality on Non Performing Loans (NPL). Diponegoro Journal Of Management, 5 (4), 1- 13.
Lee, C. C., & Hsieh, M. F. (2018). The impact of bank capital on profitability and risk in Asian banking. Journal of International Money and Finance, 32, 251–281. https://doi.org/10.1016/j.jimonfin.2012.04.013
Lena Erdawati, Atik Atikah, Yanthi Meitri Gunawan. (2020). Analysis of the Influence of Risk Profile and Profitability on Capital and Its Impact on the Performance of Conventional BPRs in Banten Province for the Period 2014 - 2018. Journal of Management and Business Vol 9 No 2
Lukviarman, Niki. 2016. Corporate Governance: Towards Conceptual Strengthening and Implementation in Indonesia. Jakarta: Era Adicitra Intermedia
Madugu, S., Ibrahim, M., & Bello, H. (2020). Credit risk management and profitability of deposit money banks in Ghana. Journal of Banking & Finance, 48(3), 45–57. https://doi.org/10.1016/j.jbankfin.2020.12.001
Menicucci, E., & Paolucci, G. (2016). The determinants of bank profitability: empirical evidence from the European banking sector. Journal of Financial Reporting and Accounting (Vol. 14). https://doi.org/10.1108/JFRA-05-2015-0060
Mohamad Bastomi (2017). The Influence of Corporate Governance, Credit Risk,
Mohammad Bitar, Kuntara Pukthuanthong, Thomas Walker. (2018). Basel III and Bank Efficiency: Does One Solution Fit All? Evidence from Islamic and Conventional Banks. SSRN Electronic Journal
Mudrajad Kuncoro and Suhardjono (2002). Banking Management: Theory and Application. First Edition. First Printing. Yogyakarta: BPFE.
Munawaroh., Yuniarti, D., Hayati, M. (2015). Regression Analysis of Mediating Variables with the Causal Step Method (Case Study: Gross Regional Domestic Product (GRDP) Per Capita in East Kalimantan Province in 2011-2013). Eksponential Journal Volume 6, Number 2, November 2015 ISSN 2085-7829
Munawir, S. 2012. Financial Information Analysis, Liberty, Yogyakarta
Nasution, YH, & Kurniasih, R. (2022). Credit risk and its impact on bank profitability: Evidence from Indonesian regional development banks. Journal of Financial Services Research, 61(2), 456-470.
Nguyen, T. T.H. (2020). Bank capital and lending: Evidence from European banks. International Review of Financial Analysis, 71, 101529. https://doi.org/10.1016/j.irfa.2020.101529
Olweny, T. (2015). Effect Of Banking Sectoral Factors On The Profitability Of Commercial Banks In Kenya. July 2011.
Pathan, S., & Faff, R. (2013). Does board structure in banks really affect their performance? Journal of Banking & Finance, 37(5), 1573–1589. https://doi.org/10.1016/j.jbankfin.2012.12.016
Financial Services Authority Regulation (POJK) Number 5/POJK.03/2015 concerning the Obligation to Provide Minimum Capital and Fulfillment of Minimum Core Capital for Rural banks
Puspitasari, Hesti Dwi (2014). The Effect of Corporate Governance Implementation on Credit Risk Through Capital Adequacy Ratio in Commercial Banks. Department of Management, Faculty of Economics, State University of Surabaya.
Putra, R., Sumadi, S. (2019). The Role of Good Corporate Governance in Improving the Performance of Banks Listed on the Indonesia Stock Exchange. Journal of Accounting and Education Vol 8 No 1
Sana Iqbal, Ahmad Nawaz, and Sadaf Ehsan. (2019). Financial performance and corporate governance in microfinance: Evidence from Asia. Journal of Asian Economics Volume 60, February 2019, Pages 1-13
Sugiyono. (2016). Quantitative, Qualitative and R&D Research Methods. Bandung: PT Alfabet
Sutedi, A. 2012. “Good Corporate Governance”. Sinar Grafika. Jakarta, Brawijaya University.
Wasiaturrahma, Sukmana, R., Ajija, SR, Salama, SCU, & Hudaifah, A. (2020). Financial performance of rural banks in Indonesia: A two-stage DEA approach. Heliyon, 6(7), [e04390].
