The enhancement of local fund institutional performance: Organizational and corporate social responsibility approach

Background The Village Credit Institution (LPD) is a microfinance institution unique to Bali, owned by customary communities and managed based on local wisdom and customary law. LPD are vital for boosting the community’s economy and preserving local customs and culture. Objectives This study aims to examine the influence of ethical leadership, organizational culture, social responsibility, and stakeholder pressure on LPD performance in Bali, with levers of control acting as a moderator. Methodology Using quantitative methods and Partial Least Squares (PLS) analysis on data from 320 Heads of LPD in Bali, using a questionnaire. Results The findings reveal that ethical leadership and organizational culture both have a positive effect on LPD performance. Conversely, corporate social responsibility and stakeholder pressure do not affect LPD performance. Regarding control mechanisms, levers of control strengthen the positive effect of ethical leadership on LPD performance. However, levers of control do not strengthen the influence of organizational culture or stakeholder pressure. Interestingly, levers of control actually weaken the effect of corporate social responsibility on LPD performance. Conclusion The study concludes that LPD management must prioritize preserving organizational culture and promoting ethical leadership. Utilizing levers of control can further reinforce ethical leadership practices, maximizing LPD performance.