Financial Performance Of Banking Companies: Examining The Relationship Between Good Corporate Governance, Leverage, And Firm Size (An Empirical Study On Banking Companies Listed On The Indonesia Stock Exchange During The 2020–2024 Period)

Adinda Rama; Wiwik  Tiswiyanti; Eko  Prasetyo

doi:10.63922/ijebir.v5i04.4202

Adinda Rama Accounting Study Program, Faculty of Economics and Business, Jambi University
Wiwik Tiswiyanti Accounting Study Program, Faculty of Economics and Business, Jambi University
Eko Prasetyo Accounting Study Program, Faculty of Economics and Business, Jambi University

DOI: https://doi.org/10.63922/ijebir.v5i04.4202

Keywords: Financial Performance; Corporate Governance; Leverage; Firm Size; Banking Sector

Abstract

This study examines the relationship between good corporate governance mechanisms, leverage, firm size, and the financial performance of banking companies listed on the Indonesia Stock Exchange during the 2020–2024 period. Previous studies have reported inconsistent findings regarding the influence of corporate governance on firm performance, indicating the need for further investigation in the banking sector. Using a quantitative approach, this study analyzes panel data from 47 banking companies, resulting in 230 firm-year observations. Data were obtained from annual reports and financial statements and analyzed using panel data regression, with the Random Effect Model selected based on the Chow, Hausman, and Lagrange Multiplier tests. The results show that the board of directors and audit committee are positively and significantly associated with Return on Equity (ROE), while independent commissioners and leverage are negatively and significantly associated with ROE. In contrast, the board of commissioners, institutional ownership, and firm size do not demonstrate significant relationships with ROE. Additional analysis indicates that the COVID-19 pandemic represents an important external factor affecting banking financial performance, as reflected by the improved significance of the model after the inclusion of a pandemic dummy variable. These findings contribute to the literature by highlighting the role of specific corporate governance mechanisms and external conditions in explaining banking profitability.

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