Financial performance as mediation is influenced by diversification and intellectual capital on sustainability performance

Abstract

This study examines and analyzes diversification and intellectual capital on sustainability performance mediated by financial performance. This research was conducted at Sharia Commercial Banks (BUS) in Indonesia, registered with the Otoritas Jasa Keuangan (OJK) for 2011 - 2018, with a total sample of 10 Islamic banks that meet the criteria according to the sampling method used, namely purposive sampling. The data analysis technique used SEM-PLS with the help of WarpPLS 7.0 software. The results showed that intellectual capital and financial performance had a positive effect on sustainability performance, but diversification was not significant on sustainability performance. Financial performance can mediate the relationship between diversification and intellectual capital on sustainability performance. The VAF method calculates the mediating effect with financial performance results partially mediates because the VAF value is less than 80%.

The moderating effect of income diversification on intellectual capital and company performance: Case study of banking in Indonesia

“…Banks support economic growth and state financial stability (Asma, 2018;Jeandry & Fajriyanti, 2023). In general, banks are financial institutions whose role is to collect funds from the public and then redistribute these funds through loans or credit schemes that can be given to companies or individuals (Duho & Onumah, 2019;Ovi et al, 2020).…”

“…However, diversification cannot directly influence company performance, but can provide flexibility in capital formation because it can access resources, including external funding. Furthermore, Jeandry & Fajriyanti (2023) also revealed that intellectual capital and income diversification positively affect company performance. Moreover, income diversification can benefit companies with the company's flexibility to expand assets from various resources owned by the company.…”

“…This asset includes knowledge, skills, experience, and employee and management relationships. Intellectual capital is an important part of innovation and development that can help companies survive business competition (Jeandry & Fajriyanti, 2023). Intellectual capital is an invisible asset, so it cannot be recorded in the balance sheet, especially if the intellectual capital is developed internally, but this does not mean it cannot be measured because all costs used in developing intellectual capital are included in the financial balance sheet (Ulum, 2022).…”

“…Several factors influence company performance, including the work environment and corporate governance (Aydoğmuş et al, 2022). Other factors, such as intellectual capital, which refers to the capabilities of a company such as knowledge, skills, and equity, can also influence company performance (Albertini & Berger-Remy, 2019;Jeandry & Fajriyanti, 2023). The diversification strategy implemented by the company also affects the company's performance.…”

“…Research by Jeandry & Fajriyanti (2023) explained that intellectual capital and company financial performance can positively affect sustainable company performance. Their research it also revealed that diversification and good intelligent capital management can improve sustainable company performance.…”