The Effect of Financial Risk and Capital Structure on the Financial Performance of Banks on the Indonesian Stock Exchange
Abstrak
The impact of capital structure and financial risk on the financial performance of banks listed on the Indonesia Stock Exchange is examined in this study. The primary question posed is how profitability as determined by return on assets is impacted by liquidity risk, credit risk, operational risk, leverage, and net interest margin. In order to give a thorough grasp of the elements influencing bank performance, this study aims to investigate the relationships between these variables. Banks' yearly financial reports for the 2020–2024 period are subjected to panel data regression analysis as part of the quantitative research methodology. The addition of net interest margin as a variable that mediates the association between financial risk and profitability is what makes this study novel. It is anticipated that the study's findings will demonstrate how effective capital structure management and financial risk reduction can boost bank profitability. The significance of an integrated risk management strategy is emphasized in the study's conclusion. The implications of the study provide practical recommendations for financial managers, investors, and regulators, and open up space for further research on external factors that affect banking performance.
##plugins.generic.usageStats.downloads##
Referensi
Ally, Z. (2022). The Impact of Credit Risk and Bank-Specific Drivers on Banks’ Performance: Evidence from the UAE Region. International Journal of Management & Information Technology, 17, 33–47. https://doi.org/10.24297/ijmit.v17i.9264
Arifaj, A. H., & Baruti, B. H. (2023). The effect of credit risk on the financial performance of commercial banks in Balkan countries. Corporate and Business Strategy Review, 4(3), 18–25. https://doi.org/10.22495/cbsrv4i3art2
Baidury, N. N. A., & Anggraeni, A. (2025). Profitability Determinants in Rural Banks: The Moderating Role of Ownership. Transekonomika: Akuntansi, Bisnis Dan Keuangan, 5(5), 1014–1030. https://doi.org/10.55047/transekonomika.v5i5.976
Chaochao, H. (2023). Research on the impact of non-financial enterprise leverage ratio on systemic financial risks. Academic Journal of Business & Management, 5(26), 39–45. https://doi.org/10.25236/ajbm.2023.052607
Cobbinah, B. B., Yang, W., Sarpong, F. A., & Nyantakyi, G. (2024). From risk to reward: Unveiling the multidimensional impact of financial risks on the performance of Ghanaian banks. Heliyon, 10(23), e40777. https://doi.org/10.1016/j.heliyon.2024.e40777
Dani, R., Mubyarto, N., & Nengsih, T. A. (2023). The Effect of Risk-Based Bank Rating on Profit Growth of Sharia National Pension Saving Bank. Ekonomis: Journal of Economics and Business, 7(2), 1125. https://doi.org/10.33087/ekonomis.v7i2.1363
Gautam, N., & Bangshi, A. (2024). Effect of Leverage, Assets Growth, Market Capitalization and Firm Age on Profitability of Nepalese Commercial Banks. The Harvest, 3(1), 57–78. https://doi.org/10.3126/harvest.v3i1.64184
Jílková, P., & Kotěšovcová, J. (2022). Profitability Management: How Can Macro and Microeconomic Determinants Influence Commercial Bank Profitability in the EU-27? TEM Journal, 11(3), 1300–1307. https://doi.org/10.18421/TEM113-39
Manurung, A. D. P. (2022). The Effect of Good Corporate Governance on Firm Value with Financial Performance As an Intervening Variable. Neo Journal of Economy and Social Humanities, 1(4), 242–254. https://doi.org/10.56403/nejesh.v1i4.54
Mashamba, T., Magweva, R., & Gani, S. (2023). Bank Profitability and Economic Growth in the Emerging Markets: the Mediating Role of Stability. Corporate and Business Strategy Review, 4(2 Special Issue), 386–401. https://doi.org/10.22495/CBSRV4I2SIART18
Mustafa, Isedu, . E., & Jeffrey, O. (2021). Does Financial Risks Has Effects on The Performance of Deposit Money Banks in Nigeria? Saudi Journal of Business and Management Studies, 6(3), 71–85. https://doi.org/10.36348/sjbms.2021.v06i03.004
Neykov, S., & Pashaly, Y. (2024). Comparative Characteristics of Scientific Approaches to Determining and Typologising Financial Risks. Economics: Time Realities, 3(73), 113–120. https://doi.org/10.15276/etr.03.2024.11
Nguyen, T. N. D., Thanh Cong, H., Nguyen, M. C., Thi Thu Loan, B., & Thi Hai Yen, N. (2023). Determinants of financial risk of firms listed on the national stock market: Dynamic panel evidence from Vietnam. Asian Economic and Financial Review, 13(11), 875–886. https://doi.org/10.55493/5002.v13i11.4878
Oudat, M. S., Ali, B. J. A., Abdelhay, S., Hazaimeh, H. M., Altalay, M. S. R., Marie, A., & El-Bannany, M. (2024). The effect of financial risks on the performance of Islamic and commercial banks in UAE. Frontiers in Applied Mathematics and Statistics, 9. https://doi.org/10.3389/fams.2023.1250227
Pratama, K., Sulistomo, A., Lestari, H. S., & Margaretha, F. (2025). Banking Health Indicators and Their Impact on Credit Risk in the Indonesian Banking Sector. Indonesian Interdisciplinary Journal of Sharia Economics (IIJSE), 8(2), 3464–3481. https://e-journal.uac.ac.id/index.php/iijse/article/view/6316
Rehan, R., Sa’ad, A. A., Haron, R., & Hye, Q. M. A. (2023). Are shariah and non-shariah firms’ capital structure determinants and financial performance related? Evidence from Malaysia. Asian Journal of Economic Modelling, 11(3), 149–164. https://doi.org/10.55493/5009.v11i3.4903
Sifrain, R. (2025). Factors Influencing Liquidity Risk of Banks in Haiti. Journal of Financial Risk Management, 14(01), 1–17. https://doi.org/10.4236/jfrm.2025.141001
Sudrajat, A. Y., Ramadania, Z., & Leon, F. M. (2024). Factors Affecting the Risk and Financial Performance of Banks in Indonesia. JASa (Jurnal Akuntansi, Audit Dan Sistem Informasi Akuntansi), 8(3), 500–513. https://doi.org/10.36555/jasa.v8i3.2534
Tesema, T. N. (2024). The effect of capital structure on performance: empirical evidence from manufacturing companies in Ethiopia. Cogent Economics and Finance, 12(1). https://doi.org/10.1080/23322039.2023.2300926
Thoa, H. O. (2022). Chapter 2 Development of Finance , Accounting and Auditing the Impact of Risk Management on Financial Performance. The Relationship Between the Accounting Benefits Gained From Erp Implementation and the Satisfaction of Its Users: Evidence From Vietnam, 4(4), 44–55.
Toha, M. (2019). Derivatif Versus Ekonomi Syariah. Indonesian Interdisciplinary Journal of Sharia Economics (IIJSE), 2(1), 91-102. https://doi.org/10.31538/iijse.v2i1.328
Toha, M., & Manaku, A. A. C. (2020). Perkembangan Dan Problematika Pasar Modal Syariah Di Indonesia. Al-tsaman: Jurnal Ekonomi dan Keuangan Islam, 2(1), 135-144. Retrieved from https://ejournal.uas.ac.id/index.php/Al-tsaman/article/view/312
Widiasmara, A., Paramitha Devi, H., & Violita, C. (2024). The Role of Self Assessment as Moderating Variable in the Effect of Risk Management and Leverage on Financial Performance. KnE Social Sciences, 2024(11), 372–393. https://doi.org/10.18502/kss.v9i6.15286
Xu, Y. (2024). Capital Structure, Industry Differentiation, and Firm Performance. Advances in Economics, Management and Political Sciences, 110(1), 100–106. https://doi.org/10.54254/2754-1169/110/2024ed0143
Yousef, A. N. B., Taha, R., Muhmad, S. N., & Abidin, A. F. Z. (2023). Operational Risk and Financial Performance of Banks in the Middle East and North Africa. Journal of International Studies(Malaysia), 19(2), 93–118. https://doi.org/10.32890/jis2023.19.2.4
Zhang, C. (2022). Impacts of Change in Capital Structure on the Profitability of Pharmaceutical Firms: A Study of Pharmaceutical Industry in Singapore. 1690–1696. https://doi.org/10.2991/978-94-6463-036-7_253
##submission.copyrightStatement##
##submission.license.cc.by-sa4.footer##Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
