Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia
Research aims: This study aims to examine the effect of liquidity ratios, activity ratios, leverage ratios, and sales growth as predictors of financial distress before the bankruptcy stage. Design/Methodology/Approach: The samples of this study included manufacturing companies listed on the Indonesi...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Universitas Muhammadiyah Yogyakarta
2022-09-01
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| Series: | Journal of Accounting and Investment |
| Subjects: | |
| Online Access: | https://journal.umy.ac.id/index.php/ai/article/view/15217 |
| _version_ | 1797991540713324544 |
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| author | Iskandar Bukhori Rita Kusumawati Meilani Meilani |
| author_facet | Iskandar Bukhori Rita Kusumawati Meilani Meilani |
| author_sort | Iskandar Bukhori |
| collection | DOAJ |
| description | Research aims: This study aims to examine the effect of liquidity ratios, activity ratios, leverage ratios, and sales growth as predictors of financial distress before the bankruptcy stage.
Design/Methodology/Approach: The samples of this study included manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the period 2016 to 2019. The samples were selected using the purposive sampling method, and 334 sample companies were obtained. Then, the data analysis employed logistic regression.
Research findings: The results revealed that all financial ratios investigated in this study significantly affected financial distress. In addition, while the liquidity ratio, activity ratio, and sales growth had a significant negative effect, the leverage ratio had a significant positive impact on financial distress.
Practical and Theoretical contribution/Originality: Currently, most research on bankruptcy has concentrated on bankrupt companies, which are the final phase of the financial distress stage. Meanwhile, the current study attempts to address the gap by researching financial distress prediction before the bankruptcy stage.
Practitioner/Policy implications: The results of this study are expected to help stakeholders to take corrective action early to prevent financial distress to the bankruptcy stage.
Research limitation: The study only used a negative profit period of two years, at the stage of severe liquidity, and utilized four years of data in one industry sector. |
| first_indexed | 2024-04-11T08:53:42Z |
| format | Article |
| id | doaj.art-407f7d691f2c4f4296edc01627133540 |
| institution | Directory Open Access Journal |
| issn | 2622-3899 2622-6413 |
| language | English |
| last_indexed | 2024-04-11T08:53:42Z |
| publishDate | 2022-09-01 |
| publisher | Universitas Muhammadiyah Yogyakarta |
| record_format | Article |
| series | Journal of Accounting and Investment |
| spelling | doaj.art-407f7d691f2c4f4296edc016271335402022-12-22T04:33:21ZengUniversitas Muhammadiyah YogyakartaJournal of Accounting and Investment2622-38992622-64132022-09-0123358860510.18196/jai.v23i3.152176204Prediction of Financial Distress in Manufacturing Companies: Evidence from IndonesiaIskandar Bukhori0Rita Kusumawati1Meilani Meilani2Department of Management, Faculty of Economic and Business, Universitas Muhammadiyah Yogyakarta, Special Region of YogyakartaDepartment of Management, Faculty of Economic and Business, Universitas Muhammadiyah Yogyakarta, Special Region of YogyakartaDepartment of Management, Faculty of Economic and Business, Universitas Muhammadiyah Yogyakarta, Special Region of YogyakartaResearch aims: This study aims to examine the effect of liquidity ratios, activity ratios, leverage ratios, and sales growth as predictors of financial distress before the bankruptcy stage. Design/Methodology/Approach: The samples of this study included manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the period 2016 to 2019. The samples were selected using the purposive sampling method, and 334 sample companies were obtained. Then, the data analysis employed logistic regression. Research findings: The results revealed that all financial ratios investigated in this study significantly affected financial distress. In addition, while the liquidity ratio, activity ratio, and sales growth had a significant negative effect, the leverage ratio had a significant positive impact on financial distress. Practical and Theoretical contribution/Originality: Currently, most research on bankruptcy has concentrated on bankrupt companies, which are the final phase of the financial distress stage. Meanwhile, the current study attempts to address the gap by researching financial distress prediction before the bankruptcy stage. Practitioner/Policy implications: The results of this study are expected to help stakeholders to take corrective action early to prevent financial distress to the bankruptcy stage. Research limitation: The study only used a negative profit period of two years, at the stage of severe liquidity, and utilized four years of data in one industry sector.https://journal.umy.ac.id/index.php/ai/article/view/15217activityfinancial distressleverageliquiditysales growth |
| spellingShingle | Iskandar Bukhori Rita Kusumawati Meilani Meilani Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia Journal of Accounting and Investment activity financial distress leverage liquidity sales growth |
| title | Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia |
| title_full | Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia |
| title_fullStr | Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia |
| title_full_unstemmed | Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia |
| title_short | Prediction of Financial Distress in Manufacturing Companies: Evidence from Indonesia |
| title_sort | prediction of financial distress in manufacturing companies evidence from indonesia |
| topic | activity financial distress leverage liquidity sales growth |
| url | https://journal.umy.ac.id/index.php/ai/article/view/15217 |
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