Abstract
This study aims to identify suitable financial distress prediction model for companies in Indonesia. The population and samples used in this study are listed companies with the data range from 2006 to 2015. Samples were selected in a purposive manner at some stage. The first stage of study was choosing a company with negative earnings for two consecutive periods in the study period with total assets of around IDR1 trillion to IDR5 trillion. For a comparison, the researcher chose companies with positive earnings by the same criteria. As independent variables other than using financial ratios, variable corporate governance with ownership structure and macro-economic variables were also used as representation of conditions faced by companies in Indonesia. Analysis method used in this study was Binary Logistic Regression Analysis. The research found financial distress prediction influences by: Working Capital to Total Assets; Current Ratio; Book value of equity to total liabilities; Total Debt to Total Assets; EBIT to Current Liabilities; and Institutional Ownership.
Highlights
Every company wants to sustain its business, though sometimes it's difficult to maintain it due to unsupportive condition and have to face financial distress
The result showed that the size of the board of directors, managerial ownership, institutional ownership, leverage, and operating capacity have a significant influence on financial distress
The results showed that the variable of ownership concentration, managerial ownership, the proportion of independent directors, the managerial agency costs, and audit opinion, have a significant effect on the likelihood of financial distress while government ownership variable has no significant influence
Summary
Every company wants to sustain its business, though sometimes it's difficult to maintain it due to unsupportive condition and have to face financial distress. Dwitridinda (2007) examined the effect of corporate governance implementation to the possibility of companies experiencing financial distress. The study showed that companies size variables, the implementation of corporate governance, as well as profit have a significant association with financial distress. Hanifah (2013) study examined the influence of corporate governance structure and financial indicators on financial distress condition. The result showed that the size of the board of directors, managerial ownership, institutional ownership, leverage, and operating capacity have a significant influence on financial distress. Rizki (2014) research reexamined the influence of the ownership structure to the possibility of financial distress in which liquidity served as an intervening variable. The results showed that (1) there is a significant negative influence of managerial ownership on financial distress. Wardhani (2006) stated that the possibility of a company fall under the financial distress is influenced by the company's ownership structure
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
