Financial distress determinants factors of retail companies with profitability as moderating (Indonesia cases 2016-2021)

Abstract

The existence of a business entity has a vital role in a country's economy, so the bankruptcy of a business entity is a concern for all stakeholders. Therefore, this research aims to determine the factors that contribute to financial distress in retail businesses in Indonesia in the 2016-2021 period. In addition, return on assets serves as a moderating variable. This study's independent variables are the current and debt-to-asset ratios. This study uses quantitative methods, statistical techniques, and moderated regression analysis (MRA) with 37 secondary data observations. The results of this study are: (i) Current ratio has a significant and positive effect on financial distress. (ii) Debt to asset ratio significantly and negatively affects financial distress. (iii) ROA as a moderating variable weakens the effect of the current ratio (CR) on financial distress. (iv) ROA as a moderating variable weakens the effect of debt-to-asset ratio (DAR) on financial distress. This research aims to provide information and references for stakeholders, academics, and practitioners interested in analyzing financial distress to support decision-making and further research. The originality of this research is related to the research period, namely 2016 to 2021, and the industrial sector, namely the retail sector, which has an essential role in a country's economy.