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The Relationship Between Interest Rates, Financial Ratios, and Bond Ratings with Profitability as a Mediating Variables in Non-Financial Sector Companies in Indonesia

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  • Marjohan Masno

    (Pamulang University, Faculty of Economics and Business, Master of Postgraduate Management Study Program. Indonesia)

  • Sampurnaningsih Sri Retnaning

    (Pamulang University, Faculty of Economics and Business, Master of Postgraduate Management Study Program. Indonesia)

Abstract

During the latest decades, regional creativity has often been considThis study seeks to investigate the relationship between interest rates, liquidity, and leverage to non-financial companies in Indonesia who have issued bond securities between 2018 and 2023 with profitability as an intervening variable. Panel data regression analysis and path analysis are used in the study to explore the connections between the variables, both directly and indirectly. According to the results, bond ratings are heavily affected by interest rates, but liquidity does not appear to play a major role. Moreover, leverage appears to have a positive effect on bond ratings. Moreover, profitability is significantly influenced by interest rates, while leverage has a detrimental effect on profitability. The study suggests that there is a slight influence of profitability on the connection between interest rates and bond ratings, but not for liquidity or leverage. Interest rates are found to have a significant positive effect on bond ratings, whereas liquidity and leverage have minor direct impacts. These findings contribute to investors in making bond investment decisions, as well as for companies in optimizing their capital structure to improve bond ratings. This study suggests further development by expanding the coverage of other industry sectors and adding variables such as corporate governance and macroeconomic indicators to increase external and internal validity.

Suggested Citation

  • Marjohan Masno & Sampurnaningsih Sri Retnaning, 2025. "The Relationship Between Interest Rates, Financial Ratios, and Bond Ratings with Profitability as a Mediating Variables in Non-Financial Sector Companies in Indonesia," Economics, Sciendo, vol. 13(1), pages 213-229.
    • Handle: RePEc:vrs:econom:v:13:y:2025:i:1:p:213-229:n:1005
    DOI: 10.2478/eoik-2025-0005
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    References listed on IDEAS

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    1. Anat R. Admati & Peter M. Demarzo & Martin F. Hellwig & Paul Pfleiderer, 2018. "The Leverage Ratchet Effect," Journal of Finance, American Finance Association, vol. 73(1), pages 145-198, February.
    2. Chen, Hui & Xu, Yu & Yang, Jun, 2021. "Systematic risk, debt maturity, and the term structure of credit spreads," Journal of Financial Economics, Elsevier, vol. 139(3), pages 770-799.
    3. Mayang Saraswaty Dewi & Eristy Minda Utami, 2020. "The influence of profitability and liquidity to bond rating and the impact on the bond yield," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(4), pages 214-219, July.
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    More about this item

    Keywords

    Bond rating; Interest rate; Leverage; Liquidity; Profitability;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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