Financial distress determinants factors of retail companies with profitability as moderating (Indonesia cases 2016-2021)

Year 2024, Volume: 7 Issue: 1, 29 - 47, 31.03.2024

Minanari Minanari Nurhasanah Nurhasanah Saaira Safira Lucky Nugroho , Erik Nugraha

https://doi.org/10.58308/bemarej.1324931

Abstract

The existence of a business entity has a vital role in a country's economy, so the bankruptcy of a business entity is a concern for all stakeholders. Therefore, this research aims to determine the factors that contribute to financial distress in retail businesses in Indonesia in the 2016-2021 period. In addition, return on assets serves as a moderating variable. This study's independent variables are the current and debt-to-asset ratios. This study uses quantitative methods, statistical techniques, and moderated regression analysis (MRA) with 37 secondary data observations. The results of this study are: (i) Current ratio has a significant and positive effect on financial distress. (ii) Debt to asset ratio significantly and negatively affects financial distress. (iii) ROA as a moderating variable weakens the effect of the current ratio (CR) on financial distress. (iv) ROA as a moderating variable weakens the effect of debt-to-asset ratio (DAR) on financial distress. This research aims to provide information and references for stakeholders, academics, and practitioners interested in analyzing financial distress to support decision-making and further research. The originality of this research is related to the research period, namely 2016 to 2021, and the industrial sector, namely the retail sector, which has an essential role in a country's economy.

Keywords

Financial Distress, Current Ratio, Debt to Asset Ratio, Return on Asset

Supporting Institution

Universitas Mercu Buana

Thanks

Thanks to Mercu Buana research center

Perakende şirketlerinde finansal sıkıntıyı belirleyen faktörler ve karlılığın moderatör rolü (Endonezya örneği 2016-2021)

Abstract

The purpose of this study is to identify variables that impact the financial distress of retail businesses in Indonesia. Moreover, the return on assets also serves as a moderator variable. The independent variables in the present study include the current ratio, the debt-to-asset ratio and the return on assets. The results of this study (i) Current ratio has no significant effect on financial distress, (ii) Debt to asset ratio has a significant and negative effect on financial ratio, (iii) Return on assets has no significant effect on financial distress, (iv) ROA moderates the effect of current ratio on financial distress, (v) ROA moderates the effect of debt to asset ratio on financial distress. The implication of this research is to provide information and references for stakeholders, academics and practitioners who have an interest in analyzing financial distress so that it can be used in supporting decision making and further research. The originality of this research is related to the research period, namely 2016 to 2021 and the industrial sector, namely the retail sector, which has an important role in a country's economy.

Keywords

Financial Distress, Current Ratio, Debt to Asset Ratio, Return on Asset

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