Impact of Risk-Sharing Mechanisms on Financial Performance Mediated by Corporate Governance in Indonesian Islamic Banks

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This study examines the impact of risk-sharing mechanisms on the financial performance of Indonesian Islamic banks, with corporate governance serving as a mediating variable. Using a quantitative approach, data were collected from 125 bank employees across various Islamic banking institutions in Indonesia. The research employed a five-point Likert scale and data analysis using Structural Equation Modeling–Partial Least Squares (SEM-PLS 3). The findings show that risk-sharing mechanisms have a positive and significant effect on corporate governance, indicating that profit-and-loss sharing instruments promote transparency, accountability, and ethical management practices. Furthermore, both risk-sharing mechanisms and corporate governance significantly enhance financial performance. Mediation analysis reveals that corporate governance partially mediates the relationship between risk-sharing mechanisms and financial performance, suggesting that stronger governance frameworks amplify the positive effects of risk-sharing practices. These results underline the importance of integrating Sharia-compliant risk-sharing models with robust governance structures to strengthen the sustainability, stability, and competitiveness of Islamic banks in Indonesia.