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Debt Policy, Liquidity Policy, and Profitability: A Proof from the Agricultural Companies in Indonesia

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  • Njotoprajitno, Rosemarie Sutjiati
  • Peter, Peter
  • Hermawan, Vicky
  • Hadianto, Bram

Abstract

Profits describe managers' performance in front of the company stakeholders, especially shareholders, suppliers, and creditors. Therefore, they must organize the financial resources well by taking exceptional policies. This research aims to know manager behavior to utilize debt and liquidity policies to create profits by examining their effect on profitability in the agricultural companies listed on the Indonesian capital market between 2014 and 2020 as the population and samples. Because of their homogeneous feature and the variables-related data, this study applies the simple random sampling method and the t-test for the coefficients in the regression model to prove each relationship. By Denoting these statistical testing results and their discussion, this study infers a negative relationship between debt policy and profitability. Conversely, the liquidity policy is positively associated with profitability. Therefore, we suggest managers use less debt and excess current assets, significantly cash, to enhance profits.

Suggested Citation

  • Njotoprajitno, Rosemarie Sutjiati & Peter, Peter & Hermawan, Vicky & Hadianto, Bram, 2022. "Debt Policy, Liquidity Policy, and Profitability: A Proof from the Agricultural Companies in Indonesia," OSF Preprints ghtz5, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:ghtz5
    DOI: 10.31219/osf.io/ghtz5
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    References listed on IDEAS

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    1. Maja Pervan & Ivica Pervan & Marijana Ćurak, 2019. "Determinants of firm profitability in the Croatian manufacturing industry: evidence from dynamic panel analysis," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 968-981, January.
    2. Panagiotis G. Liargovas & Konstantinos S. Skandalis, 2012. "The impact of leverage and other key variables on business performance: evidence from Greece," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(4), pages 472-484.
    3. Shan, Yuan George, 2015. "Value relevance, earnings management and corporate governance in China," Emerging Markets Review, Elsevier, vol. 23(C), pages 186-207.
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