Debt Financing And Firm Performance On Manufacturing Companies Listed On the IDX

Dian Ratu Hayati; Maisya Liztiara; Susy Muchtar

doi:10.24912/je.v27i1.856

Authors

Dian Ratu Hayati Faculty of Economics and Business , Trisakti University Jakarta
Maisya Liztiara Faculty of Economics and Business , Trisakti University Jakarta
Susy Muchtar Faculty of Economics and Business , Trisakti University Jakarta

DOI:

https://doi.org/10.24912/je.v27i1.856

Keywords: Long-Term Debt; Net Profit Margin; Sales Growth; Short-Term Debt; Return On Assets

Abstract

In this period, the manufacturing sector itself recorded a growth of 6.91% despite being under pressure due to the COVID-19 pandemic. Therefore, this study was conducted to determine the effect of debt financing and firm performance on manufacturing companies. The sample used was 21 companies listed on the Indonesia Stock Exchange for the period 2016 - 2020. The sampling technique used was purposive sampling and the analytical method used was panel data regression. The results of this study state that the Short term debt ratio (STDA) has no effect on Return on Assets, Long term debt ratio (LTDA) has a negative and significant effect on Return on assets, Sales Growth (GROWTH) has a positive and significant effect on Return on assets, Short term debt ratio (STDA) has no effect on Net Profit Margin, Long term debt ratio (LTDA) has a negative and significant effect on Net Profit Margin, Sales Growth (GROWTH) has a positive and significant effect on Net Profit Margin.

Author Biographies

Dian Ratu Hayati, Faculty of Economics and Business , Trisakti University Jakarta

dianratu14@gmail.com

Maisya Liztiara, Faculty of Economics and Business , Trisakti University Jakarta

liztiaramaisya@gmail.com

Susy Muchtar, Faculty of Economics and Business , Trisakti University Jakarta

susy_muchtar@trisakti.ac.id

References

Alandejani, M., Kutan, A. M., and Samargandi, N. (2017). Do Islamic Banks Fail More than Conventional Banks? Journal of International Financial Markets.

Alkhouri, R., and Arouri, H. (2021). The Effect of Diversification on Risk and Return in Banking Sector: Evidence from The Gulf Cooperation Council Countries. International Journal of Managerial Finance.

Amidu, M., and Wolfe, S. (2013). Does Bank Competition and Diversification Lead to Greater Stability? Evidence from Emerging Markets. Review of Development Finance, 152-166.

Ammar, and Boughrara. (2019). The Impact of Revenue Diversification on Bank Profitability and Risk: Evidence from MENA Banking Industry. Macroeconomics and Finance in Emerging Market Economies.

Avci, E., and Nassar, S. (2017). Intelectual Capital and Its Impact on Firm Performance of the Turkish Financial Sector Before and After Financial Crisis. Press Academia Procedia, 916.

Büyükşalvarci, A. (2012). Determinants of Capital Adequacy Ratio in Turkish Banks:. Journal of Business Management 5(27), 1119-11209.

Canh, N. P., Schinckus, C., Su, T. D., and Chong, F. H. (2021). Institutional Quality and Risk in The Banking System. Journal of Economics and Finance.

Chen, Y., Wei, X., Zhang, L., and Shi, Y. (2013). Sectoral Diversification and the Banks’ Return and Risk: Evidence from Chinese Listed Commercial Banks. Procedia Computer Science Volume 18, 1737-1746.

Cihakl, M., and Hesse, H. (2011). Islamic Banks and Financial Stability: An Empirical Analysis. Journal of Financial Services Research.

Curi, C., Lozano-Vivas, A., and Zelenyuk, V. (2015). Foreign bank diversification and efficiency prior to and during the financial crisis: Does one business model fit all? Journal of Banking and Finance, S22-S35.

Gafrej, O., and Boujelbene, M. (2021). The Impact of Performance Liquidity and Credit Risks on Banking Diversification. International Journal of Islamic Banking.

Ghenimi, A., Chaibi, H., and Omri, M. A. (2017). The Effects of Liquidity Risk and Credit Risk on Bank Stability: Evidence from the MENA Region. Borsa Instanbul Review, 238-248.

Ghenimi, A., Chaibi, H., and Omri, M. A. (2020). Liquidity Risk Determinants: Islamic vs Conventional banks. International Journal of Law and Management.

Hacini, I., Boulenfad, A., Dahou, K. (2021). The Impact of Liquidity Risk Management on the Financial Performance of Saudi Arabian Banks. Emerging Market Journal, 73

Hailu, A. and Tassew, A. (2018). The impact of investment diversification on financial performance of commercial banks in Ethiopia. Financial studies. Bucharest Vol. 22.20

Hugonnier, J., and Morellec, E. (2017). Bank Capital, Liquid reserves, and insolvency risk. Journal of Financial Economics Vol 125, 266-285.18, 41-45

Jianu, I., Jianu, I., and Turlea, C. (2017). Measuring The Company’s Real Performance by Physical Capital Maintenance. Economic Computation and Economic Cybernetics Studies and Research.

Karkowska, R. (2019). Model of Risk Diversification in the Banking Sector. Folia Oeconomica Stetinensia, 31-42.

Khan, M., and Bhatti, I. (2008). Islamic Banking and Finance: On its Way to Globalization. Managerial Finance, 708-725.

Karkowska, R. (2013). Model of risk diversification in the banking sector. Folia Oeconomica Stetinensia, Vol. 19 No. 1, pp. 32-42.

Kipleting, M. (2016). Effect of investment diversification on the financial performance of commercial. IOSR Journal of Business and Management, Vol. 18 No. 11, 102-115.

Koju, L., Koju, R., and Wang, S. (2018). Macroeconomic and Bank-Specific Determinants of Non-Performing Loans: Evidence from Nepalese Banking System. Journal of Central Banking Theory and Practice, 111-138.

Le, T. D., and Pham, X. T. (2021). The Inter-Relationships Among Liquidity Creation, Bank Capital and Credit Risk: Evidence from Emerging Asia–Pacific Economies. Managerial Finance.

Li, and Zhang. (2013). Are There Diversification Benefits of Increasing Noninterest Income in The Chinese Banking Industry? Journal of Empirical Finance.

Lopez, M., Tenjo, F., and Zarate, H. M. (2014). Credit Cycles, Credit Risk and Countercyclical Loan Provisions. Ensayos Sobre Politica Economica 32, 9-17.

Marozva, G. (2020). Liquidity Mismatch Index and Banks Stock Returns. International Journal of Economics and Business Administration.

Nguyen, N. (2019). Revenue Diversification, Risk and Bank Performance of Vietnamese Commercial Banks. Journal of Risk and Financial Management.

Paragina, A. B., and Muchtar, S. (2021). Factors Affecting Credit Risk of Conventional Banks Listed. Journal of Futures Studies.

Raei, R., Farhangzadeh, B., Safizadeh, M., and Raei, F. (2016). Study of the Relationship between Credit Diversification Strategy and Banks’ Credit Risk and Return: Evidence from Tehran Stock Exchange (TSE). Procedia Economics and Finance, 62-69.

Rupeika-Apoga, R., Zaidi, S. H., and Thalassinos, Y. E. (2018). Bank Stability: The Case of Nordic and Non-Nordic Banks in Latvia. International Journal of Economics and Business Administration.

Saunders, A., Cornett, M. M., and McGraw, P. A. (2011). Financial institutions management: A risk management approach (Vol. 8). New York: McGraw-Hill/Irwin.

Uslu, H. (2020). Intellectual Capital in Islamic Banking Sector. Journal of Politics and Development, 51.

Vallascas, F., and Keasey, K. (2012). Bank resilience to systemic shocks and the stability of banking systems: Small is beautiful. Journal of International Money and Finance, 1745-1776.

Verma, R. K., and Bansal, R. (2021). Impact of Macroeconomic Variables on The Performance of Stock Exchange: a Systematic Review. International Journal of Emerging Markets.

Vidyarthi, H. (2020). Dynamics of Income Diversification and Bank Performance in India. Journal of Financial Economic Policy.

Wang, R. and Luo, H.(R). (2020). Oil prices and bank credit risk in MENA countries after the 2008 financial crisis. International Journal of Islamic and Middle Eastern Finance and Management Vol. 13 No. 2, 219-247

Yu, H., and Kim, T. (2021). The Effects of Status on the Performance of Portfolio Diversification Strategies. Journal of Strategy and Management.