The Effects of Sustainable Development Goals, Digital Currency, Board Independence, And Macroeconomic Factors on Banking Performance in Indonesia: The Mediating Role of Third-Party Funds

Abstract

This study aims to examine the effect of Sustainable Development Goals (SDGs), Digital Currency, Board Independence and macroeconomic factors proxied by Gross Domestic Product (GDP) and Inflation on banking performance in Indonesia. It also investigates the mediating role of Third-Party Funds (Customer Deposits) in the relationship between these independent variables and banking performance. This research employs a quantitative approach using panel data regression analysis. The sample consists of 34 banking companies listed on the Indonesia Stock Exchange during the observation period 2015 - 2024. The empirical results reveal that GDP has a positive and significant effect on banking performance, while Inflation has a negative and significant effect on ROA. Board Independence also significantly affects banking performance. SDGs and Digital Currency demonstrate direct effects on performance; however, Third-Party Funds do not mediate the relationship between SDGs, Digital Currency, Board Independence, GDP, and Inflation and banking performance. Theoretically, this study extends Financial Intermediation Theory by demonstrating that deposit mobilization does not necessarily serve as the primary transmission channel in improving banking performance. From managerial and policy perspectives, the findings emphasize the importance of strengthening asset quality, risk management, operational efficiency, and macroeconomic stability in sustaining banking performance amid digital transformation and sustainability demands. However, this study is limited by the use of proxy variables to measure SDGs and Digital Currency, which may not fully capture the multidimensional nature of these concepts, the relatively limited observation period that may not reflect long-term structural effects, and the use of Third-Party Funds as the sole mediating variable. Future research is recommended to consider alternative mediating variables and extend the observation period to obtain more comprehensive findings.