The Impact of Financial Risk Management on Banking Performance in Indonesia
DOI:
https://doi.org/10.32832/jm-uika.v17i3.24636Keywords:
Financial Risk, Financial PerformanceAbstract
In this research, we analyzed how different types of financial risk impact the financial performance of Indonesian banks while controlling for additional variables such as: economic growth; inflation rate; bank size; capital adequacy ratio. In this study, credit risk, liquidity risk, and operational risk were analyzed. The value of the quantitative method with secondary data was used for the analysis, which consisted of using the financial statements of thirty-two banks located in Indonesia over the years 2020 to 2024. The analysis was done using panel data regression and used the random effects model, which produced the results from this study's analysis. The innovative aspect of this research is that it utilizes the capital adequacy ratio as a measure of capital adequacy in terms of assessing the effect of financial risks on banks' performance. The results demonstrate that by properly implementing risk management and maintaining a proper balance of capital, banks can sustain profitability. The study concludes that it is very important that banks strengthen their risk control systems and maintain economic stability to operate in a profitable manner.
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