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Analyzing the Determinants of Financial Distress in Indonesian Mining Companies

Author

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  • Muhammad Khafid
  • Tusyanah Tusyanah
  • Tejo Suryanto

Abstract

Purpose: The objective of the study is to analyze the effect of leverage, liquidity and managerial ownership on financial distress at mining companies in Indonesia. The study also examines the moderating role of profitability on the effects of leverage, liquidity and managerial ownership on financial distress. Design/Methodology/Approach: The population of this study is 41 mining sector companies listed in Indonesian Stock Exchange in 2013-2015. There are 17 companies as the sample of the study taken by purposive sampling method; then there are 51 units of analysis which are suitable to the predetermined criteria. Data are analyzed by descriptive statistical analysis and logistic regression for inferential conclusions. Findings: The results of the study show that the leverage has a positive effect on financial distress. Then, liquidity and managerial ownership do not have any effect on financial distress. Furthermore, profitability as the moderating variable is not proven to moderate the effect of leverage and managerial ownership on financial distress. However, profitability is proven to moderate significantly the effect of liquidity on financial distress. Practical Implications: This study has the guidance and or feedback to the company management to avoid financial distress. Originality/Value: The research places profitability as the moderating variable to analyze the simultaneous effect among leverage, liquidity, managerial ownership with profitability on financial distress. Then, it takes the mining sector companies as the sample to be analysed.

Suggested Citation

  • Muhammad Khafid & Tusyanah Tusyanah & Tejo Suryanto, 2019. "Analyzing the Determinants of Financial Distress in Indonesian Mining Companies," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 353-368.
    • Handle: RePEc:ers:ijebaa:v:vii:y:2019:i:4:p:353-368
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Khafid & Rida Prihatni & Ira Eva Safitri, 2020. "The Effects of Managerial Ownership, Institutional Ownership, and Profitability on Capital Structure: Firm Size as the Moderating Variable," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(4), pages 493-501, July.
    2. Emmanouil Taxiarchis Gazilas, 2024. "Does Urban Fixed-Line Telecommunication Density Influence Profitability and Operational Efficiency in Greece's Telecommunications Industry?," Finance, Accounting and Business Analysis, University of National and World Economy, Institute for Economics and Politics, vol. 6(2), pages 228-239, December.
    3. Tekalign Negash Kebede & Getahun Deribe Tesfaye & Obsa Teferi Erana, 2024. "Determinants of financial distress: evidence from insurance companies in Ethiopia," Journal of Innovation and Entrepreneurship, Springer, vol. 13(1), pages 1-23, December.

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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