RISK MANAGEMENT AND EARNINGS MANAGEMENT ON FINANCIAL PERFORMANCE IN ISLAMIC BANKING: AN EMPIRICAL STUDY OF INDONESIA

This study aims to determine the effect of risk management and earnings management on financial performances in Islamic banking: an empirical study of Indonesia. This study uses a quantitative research method. As for the sampling technique, we used purposive sampling. The type of data is secondary data. The samples used in this study were ten banks registered with the Financial Services Authority from 2015 to 2020. Data analysis in this study used the application of the SEM-PL). The result of this research indicates that risk management and earnings management affect financial performance.

about operations than shareholders as a result of which information asymmetry or conflict of interest arises between the two. Agency action is a form of earnings management (Lidyah et al., 2020).
If it is related to the issue of Risk Management, Internal Control, and Corporate Governance, then agency theory is more relevaTor to overcominge agency problems, it is deemed necessary to create a control design strategy to ensure the achievement of organizational goals that provides maximum results for agents and principals. This strategy uses tools designed in the form of Risk Management processes, Internal Control, Corporate Governance, and, the establishment of the Internal Audit function, taking into account costs and benefits (Pratiwi & Kurniawan, 2018).

Stakeholder Theory
According to Freeman (2004), stakeholders are individuals or groups that can influence or be affected by the achievement of company goals. Stakeholder theory describes that managers are obliged to meet the needs of partners rather than building company estimates to gain stakeholder support (Ayu et al., 2020). Therefore, corporate management accountability is required for stakeholders in the form of financial performance.

Methods
This research is categorized as quantitative research, namely research that utilizes panel data in the form of data sets in the form of time series and cross sections. With this quantitative method, it would be able to show the relationships that occur between the variables contained in this study. Moreover, this study used data in the form of numbers so it was very suitable for research using quantitative methods. Secondary data was used in this research because the data had been published by relevant institutions and was relevant to the data needed. As for data analysis and data testing, this research used PLS-SEM.
Source: developed for this study (2022)

Result and Discusssion Test Models
The suitability of the model built in this study can be determined through the research model test. In a good research model, the description of the suitability of the research model relationship can be seen from the results obtained through the analysis used, namely Smart PLS 3 with the following results: Based on table 1 the value of VIF is less than 10.00, so in this study, there was no multicollinearity between exogenous variables in all the equation models used. The value of R-Square is 0.932, so that it is included in the good category, which means that the effect of exogenous variables on endogenous variables is 93.2% while the remaining is 6.8 % can be explained by other variables not examined in this study. Table 1 also shows that the fit model as a whole is considered to have good quality (fit) because it has an SRMR value of <0. 05 Evaluation of the model is carried out to see the significant value and influence between variables through a bootstrapping procedure. In this study, a significance value (two-tailed) t-value was used > 1.96.

Hypothesis testing
The bootstrapping results show the results of the hypotheses proposed in the study. Hypothesis testing is done by looking at the value of the coefficient which produces a level of significance in hypothesis testing.

Risk Management on Financial Performance
Based on statistical analysis showing significant P-values, it can be concluded that risk management affects financial performance in Islamic Commercial Banks. The original sample value is -0.622, with a negative original value indicating that risk management has a negative relationship with the company's financial performance. Implementation of a good risk management system can control risks and improve a bank's financial performance. The high NPF value will reduce financial performance, as well as what happens to BOPO, the higher the ratio, the less good it is for improving financial performance. what happens next is the CAR ratio which shows that a smaller CAR number can reduce financial performance because it shows the bank's s inability to cover bank operational activities that contain risks so with the position of financial ratios representing risk management remaining at maximum conditions, sharia commercial bank business activities will continue to run smoothly and the bank's financial performance will not decrease. The application of the process of risk management has been carried out consistently at every stage of the process of business and operational activities in banking. Theoretically, risk management is a series of methodologies in carrying out risk management that may occur from bank activities. The application of the process of risk management has been carried out consistently at every stage of the process of business and operational activities in banking. Theoretically, risk management is a series of methodologies in carrying out risk management that may occur from bank activities. The application of the process of risk management has been carried out consistently at every stage of the process of business and operational activities in banking. Theoretically, risk management is a series of methodologies in carrying out risk management that may occur from bank activities.

Profit Management on Financial Performance
Results management impacts financial performance as it has a significant P-value based on statistical analysis. Management's actions may degrade the quality of information related to earnings disclosed in our financial statements. Poor quality of this information can impact a company's financial performance (Faisal & Syafruddin, 2020). Practicing profit manipulation is an expensive strategy, as the increase in profit manipulation must match the level of cash flow. Revenue management can therefore lead to reduced profits in the long run due to increased costs such as funding costs.

Conclusion
The results of this study indicate that risk management and earnings management have an effect on financial performance in Islamic commercial banks which proves that the implementation of a good risk management system can control risks and improve bank financial performance. As well as minimizing the occurrence of earnings management has an impact on the quality of financial reporting, so investors are interested in companies or banks which results in increased financial performance.