The Influence of Intellectual Capital and Corporate Governance on Financial Sustainability with Risk Management as a Mediator at LPD in Badung Regency

Abstract

The Village Credit Institution (LPD) plays a significant role in the economic development of traditional village communities in Bali, where financial functions are closely tied to local customs. As a vital financial institution, LPDs contribute not only to the economy but also to the social, cultural, and religious life of the community. With the growing complexity of financial markets, ensuring the sustainability of LPDs has become increasingly important. Intellectual capital and corporate governance are essential factors influencing the financial sustainability and risk management practices of these institutions. This research aims to analyze and test the impact of intellectual capital and corporate governance on financial sustainability and risk management, both directly and indirectly. The study was conducted across 122 LPDs operating in Badung Regency, with a sample of 190 respondents. Using non-probability sampling (saturated samples), the research examined exogenous variables, including intellectual capital and corporate governance, and their effects on the endogenous variable, financial sustainability, with risk management acting as a mediating factor. Data was collected through questionnaires and documentation, and analyzed using Structural Equation Modeling with Partial Least Squares (SEM-PLS). The results showed that both intellectual capital and corporate governance positively influence financial sustainability. Additionally, intellectual capital and corporate governance also have a positive effect on risk management, indicating that better management of knowledge and governance practices helps mitigate financial risks. Risk management was found to mediate the relationship between intellectual capital, corporate governance, and financial sustainability. These findings highlight the importance of strengthening intellectual capital and corporate governance in LPDs to ensure long-term financial sustainability and minimize operational risks. The results are expected to provide valuable insights for LPDs and policymakers, guiding future strategies to enhance the stability and effectiveness of LPDs in supporting the community.

Keywords: Corporate Governance, Financial Sustainability, Intellectual Capital, Risk Management

DOI: 10.7176/EJBM/17-5-04

Publication date: June 30^th 2025