Optimizing Financial Report Quality in Balinese Credit Institutions

Abstract

Purpose – This study examines the moderating role of the indigenous ethical framework of Tri Hita Karana (THK) in the relationships between leadership ethics, financial report accessibility, internal control systems, and financial report quality in Balinese Credit Institutions (LPDs). Design/methodology/approach – A quantitative survey was conducted involving 146 employees from LPDs across the nine administrative regions of Bali, Indonesia. Data were analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM). Findings – Leadership ethics, financial report accessibility, and internal control systems positively influence financial report quality. THK also has a positive direct effect on financial report quality. However, its moderating role is selective, significantly strengthening only the relationship between internal control systems and financial report quality, while showing no significant moderating effect on the relationships involving leadership ethics and financial report accessibility. Practical implications – The findings suggest that integrating indigenous ethical values with formal internal control systems can strengthen financial reporting practices in community-based financial institutions. Originality/value – This study extends the business ethics literature by demonstrating that an indigenous ethical framework selectively reinforces governance mechanisms rather than uniformly strengthening all determinants of financial report quality, thereby providing evidence for integrating indigenous ethics into contemporary financial governance