Credit Risk and Banking Performance in Indonesia: The Moderating Role of Bank Size

Abstract

This study examines the effect of credit risk on banking performance and tests the moderating role of bank size among banking firms listed on the Indonesia Stock Exchange during 2021–2024. Credit risk is measured by non-performing loans (NPL), bank performance by return on assets (ROA), and bank size by the natural logarithm of total assets. Using a quantitative approach based on secondary data from financial and annual reports, the study analyzes 27 banks with 108 observations. The analysis employs a moderation model involving the interaction between NPL and bank size, supported by robustness tests using several control variables. The results show that credit risk has no significant direct effect on bank performance in the main model. However, bank size significantly moderates this relationship by strengthening the negative effect of credit risk on ROA. Conditional effect analysis indicates that the effect of NPL on ROA becomes negative and significant among medium-sized and large banks. These findings suggest that bank size reflects not only asset capacity but also the complexity of risk exposure. The study implies that credit risk management and banking supervision should account for differences in institutional scale.