Improving Financial Performance through Financial Risk and Intellectual Capital

Abstract

This research aims to analyze the influence of financial risk and intellectual capital on financial performance and the influence of financial risk and intellectual capital on financial performance. This research method is explanatory research and causality research design. The population in this research is all manufacturing companies listed on the Indonesia Stock Exchange from 2019 to 2021. The data analysis technique uses path analysis with two substructure equations and testing classical assumptions. This research method is descriptive analysis research. Research data uses secondary data obtained from information in the annual reports of each manufacturing company on the Indonesia Stock Exchange during the research period with data analysis techniques using path analysis. This research shows that financial risk significantly and negatively affects the company's financial performance. The use of capital originating from debt has a negative impact. The company experienced a reduction in its profit target because it had an obligation to pay interest on debt. The greater the use of leverage, the more significant the reduction in the rate of return on its capital. Intellectual capital significantly and positively affects a company's financial performance. Intellectual capital efficiency is substantially and positively related to a company's financial performance. In the future, it is hoped that the company's financial performance will be achieved through effective risk management policies and maximum utilization of intellectual capital, which will impact increasing company value.