Model Analysis of the Impact of Financial Performance on Sustainability Performance in Indonesian KBMI 3 and 4 Banks

Abstract

This study proposes an integrative framework to examine how financial performance influences Environmental, Social, and Governance (ESG) exposure in Indonesian KBMI 3 and KBMI 4 banks through the mediating role of Slack Resources and the moderating role of Governance, Risk, and Compliance (GRC). Using Stakeholder Theory, Resource-Based View, Institutional Theory, Legitimacy Theory, and Agency Theory, the study develops a moderated mediation model that explains how financial strength is transformed into sustainability performance. The proposed empirical study will employ panel data regression using annual observations from 13 KBMI 3 and KBMI 4 banks during the 2022–2025 period. Financial performance will be represented by profitability, solvency, liquidity, asset quality, and operational efficiency, while ESG exposure will serve as the dependent variable. Slack Resources will be constructed as a composite index consisting of Available Slack, Potential Slack, and Risk-Absorbing Capacity, whereas GRC will be examined as a moderating variable. Panel regression, mediation analysis, moderation analysis, and bootstrap procedures are proposed to evaluate the research hypotheses. The study is expected to contribute theoretically by integrating strategic management and corporate governance perspectives and practically by providing an analytical framework for regulators and bank management in strengthening sustainable banking practices