Economic evaluation of the impact of leadership, technological innovation, and corporate culture on financial performance via good corporate governance and risk management in the regional government-owned People’s Economic Banks
Economic evaluation of the impact of leadership, technological innovation, and corporate culture on financial performance via good corporate governance and risk management in the regional government-owned People’s Economic Banks

Summary/Abstract: In the presented study we investigate how corporate leadership, technological innovation, and corporate culture influence financial performance (ROA/ROE) in Regional Government-owned People’s Economic Banks (BPR Pemda) in West Java and Banten regions of Indonesia marked by high license revocation rates. Drawing on Signal and Agency Theories, we test whether Good Corporate Governance (GCG) and risk management mediate these relationships. Using a quantitative, explanatory approach with a 32-BPR sample (n = 132), data were analyzed via SEM-PLS (SmartPLS 4.0). Results reveal significant positive effects: leadership (β = 0.275, p < 0.001), innovation (β = 0.151, p = 0.017), and culture (β=0.235, p = 0.008) enhance financial outcomes. GCG (β = 0.174, p = 0.006) and risk management (β = 0.188, p = 0.001) also independently boost performance. Mediation analyses confirm partial mediation, indicating GCG and risk management amplify the impact of internal drivers by reinforcing credibility and control. Our findings highlight the critical role of governance and risk discipline in stabilizing BPR Pemda operations, reducing fraud risk, and sustaining long-term financial viability. Policymakers and bank executives are urged to prioritize ethical leadership, strategic digitalization, and a compliance-driven culture to enhance institutional resilience and public trust.

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