Financial Distress: Identifying Influencing Factors and Moderating Dynamics in Manufacturing Companies

Abstract

In order to adapt to changes in the economy and reduce possible losses, financial distress plays a critical strategic role. Therefore, the purpose of this study is to determine the characteristics that reduce financial distress as well as the factors that moderate it. All manufacturing companies listed on the Indonesia Stock Exchange between 2017 and 2021 are included in this quantitative study. A total of 79 companies were chosen for observation during a five-year period using the purposive sample method, yielding 395 observations. Using Stata software, linear regression and moderated regression analysis (MRA) were used to analyze the data. This study demonstrates that the factors of leverage and ROA each have a significant impact on financial distress. It wasn't demonstrated that operating cash flow significantly affects financial distress, nevertheless. Additional findings revealed that size significantly moderates the association of leverage on financial distress. This study makes a significant contribution to our understanding of the variables that lead to financial distress, particularly in light of the manufacturing sector's poor performance during the COVID-19 pandemic. Furthermore, revealing this moderating influence might benefit investors significantly by enabling them to take business size into consideration when assessing corporate investments.