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Integrating Capital Structure, Financial and Non-Financial Performance: Distress Prediction of SMEs

Author

Listed:
  • Farida Titik Kristanti

    (Faculty of Economics and Business, Telkom University, Indonesia Author-2-Name: Sri Rahayu Author-2-Workplace-Name: Telkom University, Jl Telekomunikasi, Terusan Buah Batu, Bandung, 40257, West Java, Indonesia Author-3-Name: Deannes Isynuwardhana Author-3-Workplace-Name: Telkom University, Jl Telekomunikasi, Terusan Buah Batu, Bandung, 40257, West Java, Indonesia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Objective - The growth of SMEs in Indonesia is rising from year to year. As an anticipation of bankruptcy, predictions can be made in an integrated means from the perspective of capital structure, financial, and non-financial performance. Methodology/Technique - A sample of 39 companies were selected using purposive sampling during the research period of 2013-2017. The results of the statistical logistic regression show that profitability is an important factor in predicting financial distress of the SMEs in Indonesia. Finding - The operating income to total assets has a negative and significant effect on SMEs financial distress. Meanwhile, retained earnings to total assets have a positive impact. Indonesian SMEs must be efficient in their operational costs to avoid financial distress. Novelty - In addition, sales are also important. If the company's sales are high, and the operational cost efficiency is maintained, the retained earnings will increase. This means that the company will be safe and able to avoid financial distress. Type of Paper - Empirical.

Suggested Citation

  • Farida Titik Kristanti, 2019. "Integrating Capital Structure, Financial and Non-Financial Performance: Distress Prediction of SMEs," GATR Journals afr175, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:afr175
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    References listed on IDEAS

    as
    1. Wen-Ying Cheng & Ender Su & Sheng-Jung Li, 2006. "A Financial Distress Pre-Warning Study by Fuzzy Regression Model of TSE-Listed Companies," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 2(2), pages 75-93.
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    3. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    4. Edward I. Altman & Gabriele Sabato, 2013. "MODELING CREDIT RISK FOR SMEs: EVIDENCE FROM THE US MARKET," World Scientific Book Chapters, in: Oliviero Roggi & Edward I Altman (ed.), Managing and Measuring Risk Emerging Global Standards and Regulations After the Financial Crisis, chapter 9, pages 251-279, World Scientific Publishing Co. Pte. Ltd..
    5. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    6. Umiaty Hamzani, 2018. "Bankruptcy Prediction: SMEs Case Study in Pontianak, Indonesia," GATR Journals afr152, Global Academy of Training and Research (GATR) Enterprise.
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    More about this item

    Keywords

    Capital Structure; Financial; Distress; Non-Financial; Performance.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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