Liquidity on Banks Performance with Corporate Governance as a

Moderating Variable (Indonesia Pandemic Covid-19 Evidence)

TIPRI ROSE KARTIKA

Publishing Department, State Polytechnic of Creative Media,

INDONESIA

Abstract: - The Covid-19 pandemic requires prudence, especially in the ratio of credit or liquidity in the

banking sector and the role and supervision through the implementation of good corporate governance is

required intensively to go through dynamic policy changes. This study aims to examine the effect of liquidity

Key-Words: pandemic; liquidity, performance, good corporate governance

Received: July 25, 2022. Revised: February 4, 2023. Accepted: February 25, 2023. Published: March 16, 2023.

1 Introduction

The Covid-19 pandemic that hit Indonesia in March

2020 had an impact on the economy, especially in

the banking sector. One of the indicators that the

Bank and the Financial Services Authority (OJK)

which is a challenge for banks considering that until

now they are still covered by the Covid-19

Pandemic, [2]

These credit quality indicators can be measured

using the non-performing loan (NPL) ratio

approach. NPL can be used as an early indicator of

financial distress, the value is expected to always be

at a low value, while the higher the value indicates

special attention or going concern of a bank. A

further impact is that it can eliminate potential

banking performance using the profitability ratio as

measured by return on assets (ROA), [4], [5]. ROA

is a measurement used by analysts to measure the

company's profitability by using a comparison of net

income to total assets, [6]. Good performance in

addition to being built in an adequate financial

system also requires a supervisory mechanism or in

this case good corporate governance, [7], [8]. Good

corporate governance is considered necessary

because it can help to build an environment of trust,

decisions that are considered to require input from

the Board of Commissioners. During this pandemic

period, intense communication needs to be built

between BOD's operational and strategic decisions

while still considering input from the BOC. This

good communication during the pandemic also

needs to be increased in frequency due to the impact

of changes in Government policies and the

unpredictable movement of the impact of Covid-19.

Based on the background of the urgency, this study

weaken the influence of liquidity on company

performance.

Several previous studies as the formation of

hypotheses as follows. The better liquidity indicates

the management of cash inflows and outflows that

are more optimal, so that they can finance banking

operations and the circulation of money to be

reinvested in a timely manner to obtain maximum

this study is that liquidity has a positive effect on

banking performance.

Good Corporate Governance based on previous

research has an effect on banking performance, a

good BOC role and supervision mechanism will

strengthen the influence of liquidity policy so that it

is expected to be able to further improve the quality

of decision results and improve company

performance, [14], [15], [16], [17]. Based on

previous research, the second hypothesis (H2) in

The methodology in this study uses quantitative data

in the form of financial reports and annual reports of

banking companies listed on the Indonesia Stock

Exchange in 2019, 2020 and 2021. Quantitative data

is obtained by downloading via [18]. The population

in this study is the entire conventional banking

sector registered on the Indonesia stock exchange as

many as 123 firm years or 41 companies and each

company consists of 3 years, 2019, 2020 and 2021.

After the data is obtained, the next process is to

measurement of Return on Assets (ROA) with the

following formula [6] :

Banking liquidity in this study will use the

measurement of Non-Performing Loans (NPL) with

the following formula [3] :

professional manner based on the principles of

transparency, accountability, responsibility,

independence, fairness and equality. This variable is

If there are indicators that are disclosed, a value of 1

will be given and a value of 0 for the others. The

calculation of the score is done by calculating the

ratio as follows: :

Furthermore, after the raw data is inputted using the

operationalization of variables, it will continue with

data processing, specifically multiple linear

regression with the cross section method is used in

performance with a maximum value of 4.19% and a

minimum of -15.89%, with an average of 0.89%. By

looking at the proximity of the minimum and

average values, it can be concluded that the banking

performance of the sample companies tends to be

small.

Classical assumption test that consists of normality

test, multicollinearity, heteroscedasticity and

effect on banking performance. The results of

hypothesis testing indicate that H1 which is

suspected of having a positive effect on banking

performance is not proven, this is indicated by a

significance value of 0.860 > 0.05 so that H1 is

Rejected. The results of the second hypothesis test

which are suspected that the GCG variable

performance are accepted with a significance value

of 0.028 <0.05 so that H2 is accepted as having a

results are also possible because there is negative

banking growth, further research can issue growth

as a sample reduction criterion so that the data

deviation has a smaller range.

The second hypothesis that predicts the role of good

corporate governance will strengthen the influence

of liquidity on bank performance is proven to be

significant, but it actually indicates a negative

direction or means that the role of good corporate

strategic side.

[1] Sitanggang, “NPL Rate Increases Amid the

Covid 19 Pandemic Big Banks Accumulate

Reserves,” 2021, [Online]. Available:

besar-memupuk-pencadangan .

[3] S. S. Kumar, B. Basuki, and S. Rahmat, “The

Effect of Non-Performing Loan on

Profitability: Empirical Evidence from

Financ. Econ. Bus., vol. 8, no. 4, pp. 709–716,

2021, [Online]. Available:

doi:10.13106/JAFEB.2021.VOL8.NO4.0709.

[4] Hamka, “The Effect of Non Performing Loans

(NPL) on Profitability at PT. Bank Mandiri

Persero Tbk listed on the Indonesia Stock

Moderating Variable in Banking Companies

Mutiara Akunt., pp. 25–49, 2020.

[6] J. Jewell and J. Mankin, “What is Your ROA?

An Investigation of the Many Formulas for

Leadersh. J., pp. 79–91, 2012.

[7] D. A. H. Muharam, “The Effect of GCG on

Company Performance with Executive

doi:10.18551/rjoas.2019-02.19.

[9] OECD, “Corporate Governance Factbook,”

2021, [Online]. Available:

governance-factbook.htm.

[10] D. A. Chandra, “Analysis of the Effect of

[12] Mardiyati, “The Influence of NPL, NIM,

[13] Widana, “Effect of CAR, NPL, and BOPO on

[16] Sparta, “Impact of Good Corporate

[18] IDX, “Annual Financial Reports,” 2020,