The Influence Of Financial Ratios And Institutional Ownership On Financial Distress (An Empirical Study Of Manufacturing Companies Listed On The Indonesia Stock Exchange From 2017 To 2020)

Ruslianto Martam; Sailendra Sailendra

doi:10.63922/ijebir.v5i05.6460

Ruslianto Martam Program Studi Magister Akuntansi, Fakultas Ekonomi dan Bisnis, Universitas Pancasila, Jakarta, Indonesia
Sailendra Sailendra Program Studi Magister Akuntansi, Fakultas Ekonomi dan Bisnis, Universitas Pancasila, Jakarta, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i05.6460

Keywords: Financial Distress, Liquidity, Leverage, Sales Growth, Institutional Ownership, Profitability

Abstract

This study aims to examine the effects of liquidity, leverage, sales growth, and institutional ownership on financial distress, with profitability acting as a moderating variable in manufacturing companies listed on the Indonesia Stock Exchange during 2017–2020. This study employs a quantitative approach using secondary data from annual reports and purposive sampling. The final sample consists of 145 manufacturing companies, resulting in 580 firm-year observations. Financial distress is measured using the modified Altman Z-Score, while liquidity, leverage, sales growth, profitability, and institutional ownership are measured using the current ratio, debt-to-equity ratio, sales growth ratio, return on assets, and institutional ownership ratio, respectively. The data are analyzed using Moderated Regression Analysis (MRA) with SPSS. The results indicate that liquidity, leverage, and sales growth have positive and significant effects on financial distress, whereas institutional ownership has no significant effect. Profitability significantly moderates and strengthens the effects of liquidity and leverage on financial distress and significantly moderates and weakens the effect of sales growth. However, profitability does not significantly moderate the effect of institutional ownership on financial distress. The findings indicate that financial ratios provide important signals of financial condition and that profitability changes the strength of several relationships with financial distress.

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