Managerial Ownership, Audit Quality, and Financial Performance: The Moderating Role of Agency Costs in Indonesian Listed Banks

Nabilah Galuh Puspa Dewi; Gaguk Apriyanto; Saman Saman

doi:10.70716/emis.v4i3.804

Authors

Nabilah Galuh Puspa Dewi Master of Accounting Program, Postgraduate Program, University of Merdeka Malang, Indonesia Author
Gaguk Apriyanto Master of Accounting Program, Postgraduate Program, University of Merdeka Malang, Indonesia Author https://orcid.org/0000-0002-0670-0302
Saman Master of Accounting Program, Postgraduate Program, University of Merdeka Malang, Indonesia Author

DOI:

https://doi.org/10.70716/emis.v4i3.804

Keywords:

managerial ownership, audit quality, agency costs, financial performance, moderated regression analysis

Abstract

This study investigates how managerial ownership and audit quality relate to the financial performance of banks listed on the Indonesia Stock Exchange, and examines whether agency costs measured through the Operating Expense Ratio moderate both relationships. Drawing on panel data from 19 listed banks across the 2022–2024 period (57 firm-year observations) and estimating a Random Effects Model through Moderated Regression Analysis, the results indicate that neither managerial ownership nor audit quality (proxied by affiliation with a Big Four accounting firm) exerts a statistically significant direct effect on Return on Assets. Agency costs, however, emerge as a significant moderator in both relationships, though the direction of that moderation differs: agency costs amplify the influence of managerial ownership on financial performance while dampening the influence of audit quality. Taken together, these results imply that governance mechanisms do not enhance bank profitability uniformly; rather, their impact hinges on how efficiently a bank operates. The study contributes to agency theory by reframing agency costs as a boundary condition rather than a mere direct predictor of performance, offering a more unified account of why prior governance–performance findings have been inconsistent. From a practical standpoint, the results suggest that banks under heavier operating-cost pressure stand to gain more from managerial ownership incentives, whereas the payoff from audit-quality investments is greatest for banks that already operate efficiently.

References

Ado, A. B., Rashid, N., Mustapha, U. A., & Ademola, L. S. (2020). The impact of audit quality on the financial performance of listed companies Nigeria. Journal of Critical Reviews, 7(9), 37–42. https://doi.org/10.31838/jcr.07.09.07

Ahmed, A. M., Nugraha, D. P., & Hágen, I. (2023). The relationship between capital structure and firm performance: The moderating role of agency cost. Risks, 11(6), Article 102. https://doi.org/10.3390/risks11060102

Ajaegbu, E. E., & Mmayie, S. J. (2025). Resolving principal agent conflicts: Revisiting agency theory through the lens of internal audit. International Journal of Innovative Science and Research Technology, 10(10), 1050–1059. https://doi.org/10.38124/ijisrt/25oct380

Akbar, M., Sujono, & Bahar, H. (2026). The role of agency costs in moderating the effect of capital structure on company performance: A study of banks listed on the Indonesia Stock Exchange 2014–2023. Indonesian Annual Conference Series, 5, 95–111.

Alkurdi, A., Hamad, A., Thneibat, H., & Elmarzouky, M. (2021). Ownership structure’s effect on financial performance: An empirical analysis of Jordanian listed firms. Cogent Business & Management, 8(1), Article 1939930. https://doi.org/10.1080/23311975.2021.1939930

Andesta, C. R., & Iryanto, M. B. W. (2022). Mediasi biaya keagenan pada pengaruh kebijakan utang dan kebijakan dividen terhadap nilai perusahaan-perusahaan sektor barang konsumen primer yang terdaftar dalam Indeks IDXNonCyc Bursa Efek Indonesia periode 2018–2020. Jurnal Manajemen, 12(1), 38–55.

Ang, J. S., Cole, R. A., & Lin, J. W. (2000). Agency costs and ownership structure. The Journal of Finance, 55(1), 81–106. https://doi.org/10.1111/0022-1082.00201

Angsoyiri, D. (2021). The effect of ownership structure and audit quality on firm performance. International Journal of Multidisciplinary: Applied Business and Education Research, 2(2), 77–87. https://doi.org/10.11594/ijmaber.02.02.01

Bryman, A., & Bell, E. (2022). Business research methods (6th ed.). Oxford University Press.

Candy, C., Shelvi, S., & Budiman, J. (2024). Pengaruh tata kelola perusahaan terhadap kinerja perusahaan: Peran biaya keagenan sebagai mediasi. Performance: Jurnal Bisnis & Akuntansi, 14(2), 113–128. https://doi.org/10.24929/feb.v14i2.3406

DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183–199. https://doi.org/10.1016/0165-4101(81)90002-1

Effendi, Y., Kusumawardani, A., & Herlina, L. (2025). Pergantian auditor, independensi auditor, dan kompetensi auditor terhadap kualitas audit. Journal of Information Systems, Applied, Management, Accounting and Research, 9(1).

Ekadjaja, A., & Ekadjaja, M. (2020). Tata kelola perusahaan, risiko keuangan, dan kinerja perbankan di Indonesia. Jurnal Ekonomi, 25(3), 391–412. https://doi.org/10.24912/je.v25i3.687

Faqih, A., Rakhman Laba, A., & Dewi, A. R. S. (2024). Pengaruh penerapan good corporate governance dan corporate social responsibility terhadap nilai perusahaan dengan kinerja keuangan sebagai variabel moderasi. YUME: Journal of Management, 7(3).

Febriansyah, F., & Adlan, M. A. (2025). Saham sebagai instrumen investasi: Peluang, risiko, dan strategi investasi di tengah dinamika ekonomi global 2024–2025. Journal of Economics and Business, 3(2), 207–220.

Francis, J. R. (2011). A framework for understanding and researching audit quality. Auditing: A Journal of Practice & Theory, 30(2), 125–152. https://doi.org/10.2308/ajpt-50006

Haddad, A., El Ammari, A., & Bouri, A. (2021). Impact of audit committee quality on the financial performance of conventional and Islamic banks. Journal of Risk and Financial Management, 14(4), Article 176. https://doi.org/10.3390/jrfm14040176

Hafsyah, A. N., Mersela, M., & Lestari, H. S. (2022). Pengaruh corporate governance terhadap agency cost pada perusahaan manufaktur yang terdaftar di BEI. Jurnal Ekonomi, 27(1), 34–48.

Hery. (2017). Kajian riset akuntansi: Mengulas berbagai hasil penelitian terkini dalam bidang akuntansi dan keuangan. PT Grasindo.

Imraatussolichah, & Sumarni, I. (2024). The effect of profitability ratio on financial distress in manufacturing companies (various industrial sectors) listed on the Indonesia Stock Exchange in 2019–2020. JAPB, 5(2), 723–734.

Institut Akuntan Publik Indonesia. (2018). Panduan indikator kualitas audit pada Kantor Akuntan Publik (Keputusan Dewan Pengurus IAPI No. 4 Tahun 2018). IAPI.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Khan, H. u. R., Khidmat, W. B., Hares, O. A., Muhammad, N., & Saleem, K. (2020). Corporate governance quality, ownership structure, agency costs and firm performance: Evidence from an emerging economy. Journal of Risk and Financial Management, 13(7), Article 154. https://doi.org/10.3390/jrfm13070154

Kirimi, P. N., Kariuki, S. N., & Ocharo, K. N. (2022). Ownership structure and financial performance: Evidence from Kenyan commercial banks. PLoS ONE, 17(5), Article e0268301. https://doi.org/10.1371/journal.pone.0268301

Knechel, W. R., Krishnan, G. V., Pevzner, M., Shefchik, L. B., & Velury, U. (2013). Audit quality: Insights from the academic literature. Auditing: A Journal of Practice & Theory, 32(Supplement 1), 385–421. https://doi.org/10.2308/ajpt-50350

Meirina, E., & Yudhawati, D. (2020). Mekanisme good corporate governance dan leverage terhadap kinerja keuangan perbankan. Jurnal Pundi, 4(2), 133–144.

Munir, M., & Widiatmoko, J. (2022). Pengaruh struktur kepemilikan dan komite audit terhadap persistensi laba. Jurnal Ilmiah Akuntansi Peradaban, 8(2), 434–446. https://doi.org/10.24252/jiap.v8i2.31028

Nurmalasari, P., & Maradesa, D. (2021). Pengaruh agency cost terhadap nilai perusahaan pada subsektor properti dan real estate yang terdaftar di Bursa Efek Indonesia periode 2016–2020. Going Concern: Jurnal Riset Akuntansi, 16(4), 355–365.

Safitri, J., & Sudjono. (2021). The role of non performing financing (NPF) as a mediator for the relationship between operating expenses and operating income (BOPO) on the performance of Islamic banks in Indonesia. Dinasti International Journal of Economics, Finance & Accounting, 2(3).

Saputra, D. I. (2022). Pengaruh atribut corporate governance dan risiko terhadap nilai perusahaan dengan biaya agensi sebagai variabel moderasi [Skripsi, Universitas Islam Indonesia]. Universitas Islam Indonesia.

Sekaran, U., & Bougie, R. (2016). Research methods for business: A skill-building approach. John Wiley & Sons.

Shaqqour, O. F. (2020). Impact of institutional governance tools on reducing agency costs to commercial banks listed in the Amman Stock Exchange. International Journal of Financial Research, 11(5), 414–423. https://doi.org/10.5430/ijfr.v11n5p414

Triana, D., Muhsin, M., Heniwati, E., Mustika, I. G., & Umyana, A. (2024). Good corporate governance and internal audit on financial performance with firm size as a moderating variable in financial sector companies on the Indonesia Stock Exchange, 2020–2023. Sebatik, 28(2), 458–466. https://doi.org/10.46984/sebatik.v28i2.2498

Ugwu, C. C., Aikpitanyi, L. N., & Idemudia, S. (2020). The effect of audit quality on financial performance of deposit money banks (Evidence from Nigeria). Journal of Economics and Business, 3(1), 772–784.

Wardhani, I. G. A. G. K. (2019). Peran kinerja keuangan dalam memoderasi pengaruh good corporate governance terhadap nilai perusahaan sektor perbankan terdaftar di Bursa Efek Indonesia. Akurasi: Jurnal Studi Akuntansi dan Keuangan, 2(2), 91–108.