An Analysis of Financial Distress Determinants in Indonesia's Micro and Small Enterprises
Keywords:Liquidity, Leverage, Profitability and Financial Distress
Purpose: This study looks at the role of liquidity, leverage, and profitability in predicting the occurrence of financial distress at Micro and Small Enterprises (MSEs) sector companies registered at the Department of Cooperatives for Small and Medium Enterprises in Palangka Raya, Central Kalimantan, between 2019 and 2021.
Theoretical framework: Financial distress is defined as a situation in which a company's net profit (net income) for a given fiscal year is negative.
Design/Methodology/Approach: The sample determination technique employs purposeful sampling (purposive sampling method). A sample size of 31 Micro and Small Enterprises (MSEs) produced 29 companies between 2019 and 2021. In this study, the data is analyzed with Microsoft Excel 2019, and the hypothesis is tested with Logistic Regression Analysis with the program E-Views 10, at a level of significance of 5%.
Findings: The test results show that (1) liquidity expressed as CR has a significant influence on financial distress, (2) leverage expressed as DAR has no significant influence on financial distress, and (3) profitability expressed as ROA has a significant influence on financial distress.
Research, Practical & Social implications: The Return On Assets (ROA) test results show that profitability (ROA) has a significant negative effect on the financial distress of MSEs from 2019 to 2021. As a result, the study's hypothesis has been proven.
Originality/Value: The authors declare no potential conflicts of interest with respect to the research, authorship, and publication of this article.
Alkeswani, A., Cantrell, W., & Elewski, B. (2019). Treatment of Tinea Capitis. Skin Appendage Disorders, 5(4), 201–210. https://doi.org/10.1159/000495909
Anning-Dorson, T. (2018). Customer involvement capability and service firm performance: The mediating role of innovation. Journal of Business Research, 86, 269–280. https://doi.org/10.1016/j.jbusres.2017.07.015
Anshika, Singla, A., & Mallik, G. (2021). Determinants of financial literacy: Empirical evidence from micro and small enterprises in India. Asia Pacific Management Review, 26(4), 248–255. https://doi.org/10.1016/j.apmrv.2021.03.001
Anwar, M. (2019). Cost efficiency performance of Indonesian banks over the recovery period: A stochastic frontier analysis. The Social Science Journal, 56(3), 377–389. https://doi.org/10.1016/j.soscij.2018.08.002
Ardoin, N. M., Bowers, A. W., & Gaillard, E. (2020). Environmental education outcomes for conservation: A systematic review. Biological Conservation, 241, 108224. https://doi.org/10.1016/j.biocon.2019.108224
Bartik, A., Bertrand, M., Cullen, Z., Glaeser, E., Luca, M., & Stanton, C. (2020). How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey. Cambridge, MA: National Bureau of Economic Research. https://doi.org/10.3386/w26989
Cakranegara, P. A., Hendrayani, E., Jokhu, J. R., & Yusuf, M. (2022). Positioning Women Entrepreneurs in Small and Medium Enterprises in Indonesia–Food & Beverage Sector. Enrichment: Journal of Management, 12(5), 3873–3881. https://doi.org/https://doi.org/10.35335/enrichment.v12i5.964
D’Amato, A. (2020). Capital structure, debt maturity, and financial crisis: empirical evidence from SMEs. Small Business Economics, 55(4), 919–941. https://doi.org/10.1007/s11187-019-00165-6
Dai, Y., Hu, G., Xiong, H., Qiu, H., & Yuan, X. (2020). Psychological impact of the coronavirus disease 2019 (COVID-19) outbreak on healthcare workers in China. Medrxiv, 2003–2020. https://doi.org/https://doi.org/10.1101/2020.03.03.20030874
Garcia, F. T., ten Caten, C. S., de Campos, E. A. R., Callegaro, A. M., & de Jesus Pacheco, D. A. (2022). Mortality Risk Factors in Micro and Small Businesses: Systematic Literature Review and Research Agenda. Sustainability, 14(5), 2725. https://doi.org/10.3390/su14052725
Islami, X., Mulolli, E., & Mustafa, N. (2018). Using Management by Objectives as a performance appraisal tool for employee satisfaction. Future Business Journal, 4(1), 94–108. https://doi.org/10.1016/j.fbj.2018.01.001
Kansiime, M. K., Tambo, J. A., Mugambi, I., Bundi, M., Kara, A., & Owuor, C. (2021). COVID-19 implications on household income and food security in Kenya and Uganda: Findings from a rapid assessment. World Development, 137, 105199. https://doi.org/10.1016/j.worlddev.2020.105199
Kholisoh, S. N., & Dwiarti, R. (2020). The Analysis of Fundamental Variables and Macro Economic Variables in Predicting Financial Distress. Management Analysis Journal, 9(1), 81–90. https://doi.org/10.15294/maj.v9i1.36395
Kisman, Z., & Krisandi, D. (2019). How to predict financial distress in the wholesale sector: Lesson from Indonesian Stock Exchange. Journal of Economics and Business, 2(3). Retrieved from https://ssrn.com/abstract=3419647
Kristanti, F. T., Rahayu, S., & Isynuwardhana, D. (2019). THE SURVIVAL OF SMALL AND MEDIUM BUSINESS. Polish Journal of Management Studies, 20(2), 311–321. https://doi.org/10.17512/pjms.2019.20.2.26
Ng, T. W. H., Yam, K. C., & Aguinis, H. (2019). Employee perceptions of corporate social responsibility: Effects on pride, embeddedness, and turnover. Personnel Psychology, 72(1), 107–137. https://doi.org/10.1111/peps.12294
Noerhidajati, S., Purwoko, A. B., Werdaningtyas, H., Kamil, A. I., & Dartanto, T. (2021). Household financial vulnerability in Indonesia: Measurement and determinants. Economic Modelling, 96, 433–444. https://doi.org/10.1016/j.econmod.2020.03.028
Nugrahanti, Y. W., Sutrisno, T., Rahman, A. F., & Mardiati, E. (2020). Do firm characteristics, political connection and corporate governance mechanism affect financial distress (Evidence from Indonesia). International Journal of Trade and Global Markets, 13(2), 220. https://doi.org/10.1504/IJTGM.2020.106753
Prasetyo, P. E. (2020). The role of government expenditure and investment for MSME growth: Empirical study in Indonesia. The Journal of Asian Finance, Economics and Business (JAFEB), 7(10), 471–480.
Prijadi, R., Wulandari, P., Desiana, P. M., Pinagara, F. A., & Novita, M. (2020). Financing needs of micro-enterprises along their evolution. International Journal of Ethics and Systems, 36(2), 263–284. https://doi.org/10.1108/IJOES-05-2018-0071
Putra, Y. M. (2019). Analysis of factors affecting the interests of SMEs using accounting applications. Journal of Economics and Business, 2(3). Retrieved from https://ssrn.com/abstract=3441519
Santosa, P. W., Tambunan, M. E., & Kumullah, E. R. (2020). The role of moderating audit quality relationship between corporate characteristics and financial distress in the Indonesian mining sector. Investment Management & Financial Innovations, 17(2), 88.
Srimulyani, V. A., & Hermanto, Y. B. (2021). Impact of Entrepreneurial Self-Efficacy and Entrepreneurial Motivation on Micro and Small Business Success for Food and Beverage Sector in East Java, Indonesia. Economies, 10(1), 10. https://doi.org/10.3390/economies10010010
Su, L., & Swanson, S. R. (2019). Perceived corporate social responsibility’s impact on the well-being and supportive green behaviors of hotel employees: The mediating role of the employee-corporate relationship. Tourism Management, 72, 437–450. https://doi.org/10.1016/j.tourman.2019.01.009
Tabor, W., Chrisman, J. J., Madison, K., & Vardaman, J. M. (2018). Nonfamily Members in Family Firms: A Review and Future Research Agenda. Family Business Review, 31(1), 54–79. https://doi.org/10.1177/0894486517734683
Tambunan, T. (2019). Recent evidence of the development of micro, small and medium enterprises in Indonesia. Journal of Global Entrepreneurship Research, 9(1), 18. https://doi.org/10.1186/s40497-018-0140-4
Tambunan, T. (2021). Micro, small and medium enterprises in times of crisis: Evidence from Indonesia. Journal of the International Council for Small Business, 2(4), 278–302. https://doi.org/10.1080/26437015.2021.1934754
Tambunan, T. T. H. (2019). The impact of the economic crisis on micro, small, and medium enterprises and their crisis mitigation measures in Southeast Asia with reference to Indonesia. Asia & the Pacific Policy Studies, 6(1), 19–39. https://doi.org/10.1002/app5.264
Yazdanfar, D., & Öhman, P. (2020). Financial distress determinants among SMEs: empirical evidence from Sweden. Journal of Economic Studies, 47(3), 547–560. https://doi.org/10.1108/JES-01-2019-0030
How to Cite
Copyright (c) 2023 Maureen Marsenne, Tubagus Ismail, Muhamad Taqi, Imam Abu Hanifah
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.
Authors who publish in this journal agree to the following terms: the author(s) authorize(s) the publication of the text in the journal;
The author(s) ensure(s) that the contribution is original and unpublished and that it is not in the process of evaluation by another journal;
The journal is not responsible for the views, ideas and concepts presented in articles, and these are the sole responsibility of the author(s);
The publishers reserve the right to make textual adjustments and adapt texts to meet with publication standards.
Authors retain copyright and grant the journal the right to first publication, with the work simultaneously licensed under the Creative Commons Atribuição NãoComercial 4.0 (http://creativecommons.org/licenses/by-nc/4.0/), which allows the work to be shared with recognized authorship and initial publication in this journal.
Authors are allowed to assume additional contracts separately, for non-exclusive distribution of the version of the work published in this journal (e.g. publish in institutional repository or as a book chapter), with recognition of authorship and initial publication in this journal.
Authors are allowed and are encouraged to publish and distribute their work online (e.g. in institutional repositories or on a personal web page) at any point before or during the editorial process, as this can generate positive effects, as well as increase the impact and citations of the published work (see the effect of Free Access) at http://opcit.eprints.org/oacitation-biblio.html