Risk Management Strategies and Sustainable Financial Performance: The Moderating Role of Strategic Elements in Indonesian Public Banks

Abstract

This study investigates the influence of risk management strategies on Corporate Sustainability Performance in Indonesian public banks, considering the moderating roles of strategic elements such as Capital Adequacy Ratio, Net Interest Margin, and Financial Slack. Using panel data regression analysis on Indonesian public banks from 2019-2023, the research reveals that Non-Performing Loan negatively impacts CSP, while Loan to Deposit Ratio and Operational Efficiency do not show a direct significant influence. Crucially, Capital Adequacy Ratio and Net Interest Margin significantly moderate the relationship between NPL and BOPO with CSP, indicating their role in strengthening or buffering these impacts. Specifically, CAR acts as a pure moderator for NPL and BOPO relationships with CSP, and NIM similarly for NPL and BOPO relationships with CSP. In contrast, Financial Slack does not significantly moderate these relationships. Additionally, Leverage positively influences CSP, while bank Size and Age do not. The findings underscore the importance of integrating strategic financial elements into risk management to enhance sustainable performance in the banking sector. The model's explanatory power significantly increased from 11.7% to 62.5% with the inclusion of control and moderating variables.