The Ability of Firms Leverage on Tourism Sector to Survive During the Pandemic

Abstract

The development of tourism industries in Indonesia has been heavily hit by the COVID-19 pandemic since early 2020 which has caused an unprecedented crisis in this sector. As a result, there is an increase in the average debts in this sector to maintain the long-term stability of firms. This study aims to examine the difference in firm value affected by the firm leverage, by comparing the year 2019 before the pandemic with the year 2020 period during the pandemic occurred. The data were collected through datastream and the www.idx.co.id website. The samples were selected using the purposive sampling method with the final samples being 39 companies per year. To measure the leverage variable, debt ratio, time interest earned, and debt-equity ratio were employed, while the firm value variable was processed using Tobin’s Q. Furthermore, the data obtained were analyzed using SPSS version 26. Using primary and secondary data, the study reveals that the level of leverage before and during the pandemic demonstrates an unsubstantial difference in terms of companies’ sustainability. Along with that, the three variables mentioned above have an insignificant impact on the firm value.