WHY DOES FINANCIAL DISTRESS HAPPEN TO COMPANIES? (CASE STUDY ON PRIMARY CONSUMER GOODS SECTOR COMPANIES LISTED ON IDX)

Abstract

Purpose: This research aims to find out how the influence of liquidity, leverage, probability and sales growth on financial distress conditions. The dependent variable in this study is financial distress. Meanwhile, the independent variables are liquidity, leverage, profitability, and sales growth. Method: The population in this study are primary consumer goods sector companies listed on the Indonesia Stock Exchange during 2018-2022. The samples obtained were 16 companies which were selected using purposive sampling method. The analytical tool used is panel data regression analysis with the help of eviews 10 software. Result and conclusion: The results showed that liquidity and leverage are significantly influenced to financial distress, while profitability and sales growth are not significantly influenced to financial distress. The limitation in this study are the independent variables used were only liquidity, leverage, profitability and sales growth, and the research was only conducted on consumer non- cyclical. Future researchers are expected to use another measure for projecting financial distress, to add independent variables and examine companies other than consumer noncyclicals and increases the observation period in the study. Research implications: The implication of this research is that the company is expected to increase current assets, controlling external loans, increase profitability and increase sales growth to avoid financial distress.