Internal Factors and Financial Performance: Bank Size as Moderator

Abstract

This study examines how banking-specific internal determinants shape financial performance, positioning bank size as a moderating construct. Inconsistent empirical evidence concerning the roles of capital adequacy, asset quality, management quality, liquidity, and cost efficiency in driving profitability motivated this inquiry. Employing a quantitative design with secondary data drawn from 32 banks listed on the Indonesian Stock Exchange over 2020–2024, the research applies panel data regression under a fixed effects specification. The primary contribution to the existing body of knowledge lies in simultaneously testing multiple internal determinants while incorporating bank size as a moderating variable. The novelty of this study rests on the inclusion of cost efficiency ratio as a profitability factor within the moderation framework. Evidence reveals that liquidity and cost efficiency exert a statistically positive and significant influence on financial performance, whereas capital adequacy, asset quality, and management quality yield no discernible effects. Bank size contributes positively to financial performance on a direct basis; however, it attenuates the effects of both liquidity and cost efficiency. These outcomes carry practical implications for bank managers seeking to enhance liquidity practices and control operational expenditures. Keywords : Bank size; Capital adequacy; Cost efficiency ratio; Financial performance; Liquidity.