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The phenomenon of financial distress of manufacturing companies in Indonesia during the Covid-19 Pandemic

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  • Puji Handayati

    (Universitas Negeri Malang, Malang, Indonesia)

  • Tomy Rizky Izzalqurny

    (Universitas Negeri Malang, Malang, Indonesia)

  • Slamet Fauzan

    (Universitas Negeri Malang, Malang, Indonesia)

  • Nurus Shobah

    (Universitas Negeri Malang, Malang, Indonesia)

Abstract

The purpose of this study is to examine the differences in the value of the financial distress of manufacturing companies before and after the Covid-19 pandemic, as well as to examine the determinants that affect the financial distress of manufacturing companies before and after the Covid-19 pandemic. This study is a quantitative study with the population in this study namely manufacturing companies in Indonesia. The sample is 1005 Firm Years in manufacturing companies in Indonesia. These Manufacturing Companies were taken from 2016-2021, but we divided the sample into 2 categories, namely 2016-2019, namely in the pre-pandemic period as many as 653 firm years, and during the pandemic as many as 352 firm years. The dependent variable used in this study is financial distress, measured by the O-Score Model. Furthermore, the independent variables are profitability using ROA, liquidity using the current ratio, and leverage using the Debt to Assets Ratio. The test results show no difference between the financial distress of manufacturing companies in Indonesia before and during the pandemic. During the pandemic, financial ratios became more considered in predicting financial distress than before the pandemic. The role of profitability is a factor that impacts financial distress is more impactful in the pre-pandemic period. The role of liquidity being a factor that impacts financial distress is more impactful during the pandemic. Leverage can also be a good indicator in predicting financial distress both in the pre-pandemic and during the pandemic. Key Words: Financial Distress, Manufacturing, Financial Ratios, Pandemic

Suggested Citation

  • Puji Handayati & Tomy Rizky Izzalqurny & Slamet Fauzan & Nurus Shobah, 2022. "The phenomenon of financial distress of manufacturing companies in Indonesia during the Covid-19 Pandemic," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(9), pages 166-173, December.
    • Handle: RePEc:rbs:ijbrss:v:11:y:2022:i:9:p:166-173
    DOI: 10.20525/ijrbs.v11i9.2205
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    References listed on IDEAS

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    1. Evangelos C. Charalambakis & Ian Garrett, 2019. "On corporate financial distress prediction: What can we learn from private firms in a developing economy? Evidence from Greece," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 467-491, February.
    2. Amrizah Kamaluddin & Norhafizah Ishak & Nor Farizal Mohammed, 2019. "Financial Distress Prediction Through Cash Flow Ratios Analysis," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 63-76, May.
    3. Anton Lisin & Andrei Kushnir & Alexey G. Koryakov & Natalia Fomenko & Tatyana Shchukina, 2022. "Financial Stability in Companies with High ESG Scores: Evidence from North America Using the Ohlson O-Score," Sustainability, MDPI, vol. 14(1), pages 1-13, January.
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