THE INFLUENCE OF LIQUIDITY, GOOD CORPORATE GOVERNANCE, AND CAPITAL QUALITY ON SUSTAINABILITY BUSINESS MEDIATED BY CREDIT QUALITY

Between 2014 and 2023, the number of Bank Perkreditan Rakyat in Indonesia declined by 14%, accompanied by a drop in financial performance, marked by declining ROA, ROE, and rising NPLs. Additionally, rural banks are mandated to implement Sustainable Finance Principles under POJK No. 51/2017. This study examines the influence of liquidity, Good Corporate Governance (GCG), and capital quality on sustainable business, with credit quality as a mediating variable. Using a sample of 18 BPRs with assets above IDR 1 trillion and published governance reports, the study employs descriptive statistics, panel data regression, and the Sobel test. The results reveal that liquidity has no effect on sustainability business practices; GCG has a significant positive impact on sustainability business practices; capital quality does not influence sustainability business practices; credit quality has a significant negative effect on sustainability business practices; liquidity does not affect credit quality; GCG does not influence credit quality; capital quality has a significant negative impact on credit quality; credit quality does not mediate the effect of liquidity on sustainability business practices; credit quality does not mediate the effect of GCG on sustainability business practices; and credit quality mediates the impact of capital quality on sustainability business practices.