Effects of Institutional Ownership, Independent Commissioners, and CSR Disclosure on ROA: the Moderating Role of Green Credit in Indonesian Conventional Banks

Abstract

Increasing commitment to sustainable finance has encouraged banks to strengthen corporate governance, improve the transparency of corporate social responsibility (CSR) disclosure, and expand environmentally responsible lending practices. Although previous studies have examined the associations of institutional ownership, independent commissioners, and CSR disclosure with financial performance, their findings remain mixed. Moreover, empirical evidence on the moderating role of green credit in these relationships remains limited, particularly among Indonesian conventional commercial banks. This study examines the associations of institutional ownership, independent commissioners, and CSR disclosure with bank financial performance and investigates the moderating role of green credit. Using a balanced panel dataset of 176 firm-year observations from 16 conventional commercial banks listed on the Indonesia Stock Exchange (IDX) during 2014–2024, the study employs the Fixed Effect Model (FEM) to examine the direct associations and Moderated Regression Analysis (MRA) to assess the moderating role of green credit. The findings show that institutional ownership (β = 0.028, p = 0.022), independent commissioners (β = 0.019, p = 0.037), and CSR disclosure (β = 0.022, p = 0.033) are positively and significantly associated with return on assets (ROA). Green credit also significantly moderates the associations of institutional ownership (β = 0.047, p = 0.019), independent commissioners (β = 0.039, p = 0.027), and CSR disclosure (β = 0.062, p = 0.008) with ROA. The inclusion of green credit and its interaction terms increases the model's explanatory power from R² = 0.45 to R² = 0.61. These findings provide empirical evidence that governance mechanisms, CSR disclosure, and green credit are associated with bank financial performance and extend the application of Agency Theory and Stakeholder Theory within the sustainable finance context. The findings also offer practical considerations for regulators, policymakers, and bank managers regarding governance quality, CSR disclosure, and the development of green financing practices.