The Effects of Good Corporate Governance, Independent Boards, and Firm Size on Bank Financial Performance in the Digitalisation Era: A Capital Structure as a Mediation Variable

., Moeljadi and Titisari, Kartika Hendra and Iskandar, Yusuf and Yuniarsa, Sherlinda Octa (2020) The Effects of Good Corporate Governance, Independent Boards, and Firm Size on Bank Financial Performance in the Digitalisation Era: A Capital Structure as a Mediation Variable. The Effects of Good Corporate Governance, Independent Boards, and Firm Size on Bank Financial Performance in the Digitalisation Era: A Capital Structure as a Mediation Variable, 13 (12).

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Abstract

Financial performance is important for banks. Determinant financial performance remains a concern for bank management. This study examined how good corporate governance, independent boards, and company size can improve financial performance. This study also examined capital structure in the relationship framework. A total of 30 banks reporting on the Indonesian Stock Exchange were a sample, observed between 2015-2018. Path analysis tested the hypothesis. The test results show that good corporate governance does not affect financial performance, while independent boards and company size have a positive effect on financial performance. The capital structure also mediates the influence of independent board and bank size on financial performance. Further, this study provides empirical evidence that capital structure is directly proportional to bank financial performance in this digitalization era. The implication is banks must pay more attention to the supervising, independent board structure, to improve the operational performance and financial performance of companies. An increase in the size of bank assets can increase financial performance, thereby increasing the bank's operational performance.

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