Internal Audit Quality and Green Lending: Strengthening Low-Carbon Environmental Performance in Indonesian Listed Commercial Banks
DOI:
https://doi.org/10.61194/ijtc.v7i4.2511Keywords:
internal audit quality, green lending, low- carbon environmental performance, sustainable finance, banking sectorAbstract
The transition toward a low-carbon economy has increased the importance of sustainable finance and effective corporate governance within the banking industry. Green lending has become a key financing strategy for supporting environmentally sustainable investments; however, prior studies have largely examined internal governance and green lending separately, leaving limited evidence on whether Internal Audit Quality can strengthen the environmental effects of green lending. This study examines the effects of Internal Audit Quality (IAQ) and Green Lending (GL) on Low-Carbon Environmental Performance (LCEP) and investigates whether IAQ strengthens the relationship between GL and LCEP in Indonesian listed commercial banks. Using a quantitative research design, this study analyzes panel data from 47 Indonesian listed commercial banks during 2020–2024, resulting in 235 firm-year observations. The hypotheses are tested using a Fixed Effect Model (FEM) following panel model selection tests. IAQ is measured using a disclosure-based index, GL is measured by the proportion of green financing, and LCEP is measured using a composite disclosure index reflecting banks’ environmental commitments and low-carbon initiatives. The results indicate that IAQ has a positive and significant effect on LCEP (β = 0.367, p = 0.0001), while GL also has a positive and significant effect on LCEP (β = 0.298, p = 0.0002). Furthermore, the interaction between IAQ and GL is positive and significant (β = 0.184, p = 0.0061), indicating that higher IAQ strengthens the positive effect of GL on LCEP. These findings highlight the strategic role of internal auditing in strengthening governance and supporting sustainable finance implementation. The study contributes to the sustainable finance and corporate governance literature by integrating IAQ and GL within a unified framework to explain LCEP in emerging-market banking institutions.
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Copyright (c) 2026 Vita Citra Mulyandini, Muhammad Angionaldi
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This work is licensed under a Creative Commons Attribution 4.0 International License.
