Financial Liquidity of Indonesian Manufacturing Companies before and during the COVID-19 Pandemic

Abstract

The occurrence of the COVID-19 pandemic has had a significant impact on human life in the world, including the companies’ business activities. Increased business risk makes financial liquidity an essential financial policy in the face of a pandemic. This study analyzes differences in liquidity before and during the COVID-19 pandemic in manufacturing companies on the Indonesian Capital Market. There are three financial liquidity ratios tested in this research: the current ratio, the quick ratio, and cash holdings. Empirical testing of this research uses the Wilcoxon signed rank test. The empirical findings of this research have not been able to prove a difference between the current ratio and the quick ratio in the period before and during the COVID-19 pandemic. However, this study proved that there were differences in cash holdings in the period before and during the COVID-19 pandemic in the case of manufacturing companies on the Indonesian Capital Market. This research implies that manufacturing companies on the Indonesian Capital Market apply a conservative financial strategy in the face of the COVID-19 pandemic. The company adopted a policy of increasing the company’s cash holdings as an effort to maintain adequate company liquidity, maintain the sustainability of business operations, and prevent bankruptcy.