Financial Risk, Debt, and Efficiency in Indonesia’s Construction Industry: A Comparative Study of SOEs and Private Companies

Febrianto Arif Wibowo (), Arif Satria, Sahala Lumban Gaol and Dikky Indrawan ()
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Febrianto Arif Wibowo: School of Business, IPB University, Bogor 16151, Indonesia
Arif Satria: School of Business, IPB University, Bogor 16151, Indonesia
Sahala Lumban Gaol: Bali Energy Limited, Jakarta 12190, Indonesia
Dikky Indrawan: School of Business, IPB University, Bogor 16151, Indonesia

JRFM, 2024, vol. 17, issue 7, 1-18

Abstract: This study aims to evaluate the financial risk, debt, and efficiency of state-owned enterprises (SOEs) in Indonesia’s construction industry and compare these aspects with those of private companies through financial ratio analysis and efficiency analysis approaches. Four SOEs from the construction sector were evaluated and compared to five private companies with financial data ranging from 2015 to 2022. Financial ratio analysis was applied to assess debt and financial risk, while efficiency analysis utilized data envelopment analysis (DEA) and paired t -tests to validate differences between the two groups of companies. This study reveals that the financial ratio performance of state-owned companies is relatively poor, with low profitability, critical liquidity, and a high debt ratio. Debt, as a source of capital in financing construction projects, causes companies to face a greater debt risk. This study also validates that SOEs have lower efficiency compared to private companies. In response to current challenges, SOEs should prioritize enhancing liquidity through faster receivable collections, debt restructuring, capital infusions, and divestment, reducing non-essential investments, focusing on asset recycling, and improving project efficiency.

Keywords: construction industry; debt; efficiency; financial performance; state-owned enterprises (SOEs) (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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