ANALYSIS OF THE EFFECT OF CREDIT RISK AND OPERATIONAL RISK ON FINANCIAL PERFORMANCE WITH GOOD CORPORATE GOVERNANCE AS A MODERATING VARIABLE IN THE MANAGEMENT OF SUGARCANE FARMERS’ RECEIVABLES AT PT PABRIK GULA CANDI BARU

Abstract

Analysis of the Effect of Credit Risk and Operational Risk on Financial Performance with Good Corporate Governance as a Moderating Variable in the Management of Sugarcane Farmers’ Receivables at PT Pabrik Gula Candi Baru. This study examines the association of credit risk and operational risk with financial performance, and the moderating role of a governance implementation index (GCGI), at a sugar mill that finances its partner farmers. Monthly secondary data from January 2023 to December 2025 (36 observations) were analyzed with moderated time-series regression that controls for the milling season and a time trend, using Newey-West standard errors, and were then subjected to robustness checks (HC3, wild bootstrap, influence diagnostics, and alternative specifications). Credit risk is proxied by the payment shortfall against the annual collection target, operational risk by negative gross profit margin, and governance by the share of eight documented governance milestones that have been implemented. Operational risk is significantly and negatively associated with net profit margin and return on assets in every specification, whereas credit risk and GCGI show no significant direct association. The negative association of operational risk is weaker at higher GCGI, but this moderation is only partially robust: it holds for return on assets under most specifications, not for net profit margin, and it depends heavily on a single extreme month (December 2025). Because the operational-risk proxy overlaps mechanically with profit margin and governance is observed as a single step after 2024, the findings are indicative rather than causal