Factors That Affect Financial Distress in Indonesia

Abstract

The results show that, it is proven that the variable liquidity and interest rates have a negative effect on financial distress. Meanwhile, the variables of Profitability, Leverage and Company Size have a positive effect on financial distress. While the Economic Stimulus variable is known to be the relationship between all variables of Liquidity, Profitability, Leverage, Company Size and Interest Rate on variables to Financial Distress. This means that company leaders must take into account liquidity, profitability, leverage, company size and interest rates to avoid financial distress.

The Indonesia Stock Exchange Companies: The Existence of Institutional Ownership as a Moderating Variable of the Influence of Financial Ratio on Financial Distress

“…Conversely, when the company has a low liquidity ratio, it means that the company's finances are in a bad state and are said to be in an illiquid position (Laksmiwati et al, 2021). A result study conducted by Hastiarto (2021) in manufacturing companies in Indonesia showed that companies would experience lower risks if they had a high percentage level of liquidity, this result is also in line with research by Mesak (2019) and Susdaryo et al, (2021) which showed that liquidity ratios have a significant negative influence on financial distress. However, there are studies that show different results, where the level of liquidity will not affect the risk of companies experiencing financial distress (Arini et al, 2021;Destriwanti et al, 2022;Dirman, 2020).…”

Determination of Financial Distress in Transportation Equipment Industry: Evidence from Indonesia

“…This means that if the intensity of the use of debt in financing a company is greater, then the possibility of financial distress will be even greater. This research is supported by (Susdaryo et al, 2021), which states that in this study states that the leverage variable has a positive effect on financial distress. Based on the results of the regression analysis, the leverage variable shows a positive effect on financial distress.…”

“…According to (Wangsih et al, 2021), that the size of the company which has a significance value of less than 0.05, indicates that partially the size of the company has a significant and negative effect on financial distress in retail trading sub-sector companies listed on the Indonesia Stock Exchange. According to (Susdaryo et al, 2021) in this study states that the company size variable has a negative effect on financial difficulties. Based on the results of regression analysis, the firm size variable does not show a significant effect on the financial distress variable.…”

“…This shows that the size of the company has an effect on financial distress received. This means that the greater the total assets owned by a company, the less likely the company is to experience financial distress.This research is supported by (Rianti & Yadiati, 2018),(Abdu, 2022), (Liahmad et al, 2021), (Thim et al, 2011) and (Susdaryo et al, 2021).…”

“…Therefore, when using nonfinancial variables as independent, an intermediate variable is needed to determine the bankruptcy probability. According to (Susdaryo et al, 2021), A company can be categorized as experiencing financial distress if the company has a performance that shows negative net income. if company experiences financial distress, the operating conditions of the firm deteriorate thus leading to heavy financial burden on the firm resulting to Financial distress.…”