The Influence of Financial Indicators, Corporate Governance and Macroeconomic Variables on Financial Distress (original) (raw)
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Media Ekonomi dan Manajemen
Financial distress is a condition where a company is unable to meet its obligations when they directed to bankruptcy. The purpose of this study was to analyze influence of corporate governance, profitability, liquidity, leverage and earning growth on financial distress. Research sample data used in this study were manufacturing companies listed on the main board and development board on the Indonesia Stock Exchange in 2016-2020. Logistic regression analysis had been applied to analyze data of study. The results show that the factors that influence Financial Distress in manufacturing companies on the main board and development board were different. For manufacturing companies on main board, influencing factors of financial distress were independent audit committee, liquidity, leverage, and earning growth. Meanwhile, board size, profitability, liquidity, leverage and earning growth were influencing factors of financial distress for manufacturing companies on development board.
The Determinants of Financial Distress: An Empirical Investigation of Indonesian Firms
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This study aims to investigate the determinants of financial distress (i.e., financial indicators, firm size, institutional and managerial ownership). The sample of this study includes 250 firms registered in Indonesia Stock Exchange (IDX) of the period 2014 – 2017. By using logistic regression analysis, the results show that 1) leverage has a positive effect on financial distress; 2) profitability, operating capacity, and firm size have a negative effect on financial distress; and 3) liquidity, sales growth, and institutional and managerial ownership have no effect on financial distress.
IEOM Singapore, Proceeding, 2021
Financial distress is a state under which the organisation's financial position is unstable yet has not gone bankrupt. Many manufacturing companies in Indonesia experienced corporate financial instability, revenues from manufacturing companies continued to fluctuate, and some companies experienced negative operating profits. It creates a significant effect on financial distress, where it is not just the business that will incur losses but also the stakeholders. Thus, the present study attempts to analyse the factors (i.e., liquidity, profitability, leverage, company size, and interest rates) that affect financial distress in Jakarta Stock Exchange-listed companies, Indonesia. This study uses secondary data collected from two sources, i.e., the Central Bureau of Statistic and Financial Services Authority website for 2014 to 2020. The data analysed using multiple linear regression by assisting with econometric software, namely Eviews-10. This study found that liquidity, profitability, leverage, and interest rate significantly affect financial distress. Besides that, firm size does not affect financial distress. The results showed that, from the independent variables studied, it was proven that the liquidity variable and the interest rate had a negative effect on financial distress. Meanwhile, the variables of profitability and leverage have a positive effect on financial distress. It means that company leaders must consider liquidity, profitability, leverage, company size and interest rates to avoid financial distress. However, it is also necessary to pay attention to the Economic Stimulus, which can moderate these variables' relationships.
Journal of Applied Economics in Developing Countries, 2018
The main objective of this research is to examine the influence of financial ratios (Current Ratio, Debt to Equity Ratio, Debt to Assets Ratio, Return on Asset) and governing mechanism (institutional ownership) to the financial distress of the non financial companies listed in Indonesian Stock Exchange. The data used in this research are secondary data. Samples in this research are non financial companies listed during 2012-2016. The hypotheses are tested by running logistic regression analysis. The dependent variable is financial distress proxied by earning per share. The results show that institutional ownership influenced financial distress. While Current Ratio, Debt to Equity Ratio, Debt To Assets Ratio, and Return On Asset did not influenced the financial distress.
Financial performance, corporate governance, and financial distress
Insyma, 2018
This study aims to analyze the effect of financial ratios and corporate governance on financial distress by making a prediction model of bankruptcy using data from non-financial sector companies listed on the Indonesia Stock Exchange (IDX). This research used the quantitative approach with a logistic regression model. The samples used in this study were 310 companies from the non-financial sector with 1550 observations. The research findings suggested that the variables included in the model are current liabilities to total assets, total liabilities to total assets, book-to-market value, blockholder ownership, sales to total assets, earnings before interest, and taxes to total assets. While the audit opinion variable has no significant effect. Although not all the variables which have been incorporated into the model were significant, the insignificant variables still remained in the model to improve the accuracy of the prediction model. The results suggested that the accuracy of this bankruptcy prediction model was 98.1%.
Corporate governance on financial distress: Evidence from Indonesia
Management Science Letters, 2021
The main objective of this paper is to explore the most significant determinants of financial distress of manufacturing companies in Indonesia and to provide explanations on this issue by using multiple regression models. With Modigliani and Miller’s and Trade-off theories were reviewed to formulate a testable proposition on the determinants of financial distress of manufacturing companies in Indonesia. Multiple regression models were used as a statistical tool to investigate the most significant profitability determinants of manufacturing companies in Indonesia. The Lisrel software was used to analyze 300 manufacturing companies listed on the Indonesia Stock Exchange. It was found that institutional ownership, firm size, profitability, and board independence as variables had a positive relationship in an effort to avoid financial distress. Meanwhile, the board size variable had an insignificant positive relationship. The findings are consistent with the pecking order and financial ...
Jurnal Penelitian Ekonomi dan Bisnis
Financial distress is a condition where management fails to manage company finances. This study aims to determine the effect of leverage, net profit margin, liquidity, and sales growth on financial distress with corporate governance as a moderating variable. This sample used all consumer goods sector companies listed on the Indonesia Stock Exchange for the 2018-2020 period. Sampling was used with the purposive sampling technique and selected 25 companies. Data analysis used multiple linear regression and the absolute difference value test. The results are that the variables of leverage, net profit margin, and liquidity affect predicting financial distress. Meanwhile, sales growth does not affect financial distress. As measured by managerial ownership, corporate governance can moderate the effect of liquidity on financial distress. Still, it cannot moderate the effect of leverage, net profit margin, and sales growth on financial distress. Keywords:leverage, net profit margin, liqudit...
Analysis of financial distress in banking companies listed on the indonesian stock exchange
AKUNTABEL
Financial distress is a condition when a company experiences an inability to fulfill all financial obligations in the long term. This study analyzes capital structure, female directors, liquidity, and profitability predicting the possibility of financial companies in the 2018-2020 period experiencing financial distress. The research population is financial companies operating on the IDX in the 2018-2020 period with as many as 105 companies. Determination of the sample used is purposive sampling method with the results of 46 companies. The research analysis technique is panel data regression with the best fixed effect model. Based on the analysis results show that the capital structure has a significant effect on financial distress where the higher the company's leverage will cause financial distress. While female director, liquidity, and profitability have no significant effect on the company's financial distress. It is expected that the company will always pay attention to the level of use of leverage so that it can maintain the optimal condition of the company's cash. For future research, it is possible to add variables such as inflation rate, interest rate, tax, firm size, growth sales which can affect financial distress.
International Journal of Financial Research, 2020
This study aims to examine the effect of four variables, which include independent commissioners, audit committees, institutional ownership and managerial ownership as a proxy for the corporate governance mechanisms on financial distress. This was carried out on the manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2016-2018. The samples were selected using the purposive sampling method and 224 data were obtained. The hypothesis in this study was tested using logistic regression. The results showed that independent commissioners have a negative influence on financial distress, while the audit committee, institutional ownership and managerial ownership have no effect. This implies that an independent commissioner functions as an effective supervisory mechanism to prevent a company from experiencing financial distress. Furthermore, two control variables used in this study, namely leverage and profitability, were able to produce results as predicted. It was discov...
International Journal of Professional Business Review
Purpose: This aimsof this study is to identify and analyze the effects of liquidity, profitability, and leverage ratio changes to predict financial distress experienced by manufacturing companies listed on the Indonesian stock exchange. Theoretical framework: The quality of financial reports can improve and enhance a company’s financial performance and confirm the agency theory. The use of financial report quality can help explain relationship conflicts between the principal and the agents and strengthen the explanation of agency theory. Design/Methodology/Approach: The methodology this study used secondary data from the Indonesian stock exchange website. The research population consisted of all manufacturing companies listed on the Indonesian stock exchange. The sample of this study was chosen based on purposive sampling techniques resulting in 15 manufacturing companies meeting the criteria for analysis using logistic regression. The data were analyzed in a quantitative manner...