The Relationship Between Interest Rates, Financial Ratios, and Bond Ratings with Profitability as a Mediating Variables in Non-Financial Sector Companies in Indonesia

Marjohan Masno () and Sampurnaningsih Sri Retnaning
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Marjohan Masno: Pamulang University, Faculty of Economics and Business, Master of Postgraduate Management Study Program. Indonesia
Sampurnaningsih Sri Retnaning: Pamulang University, Faculty of Economics and Business, Master of Postgraduate Management Study Program. Indonesia

Economics, 2025, vol. 13, issue 1, 213-229

Abstract: During the latest decades, regional creativity has often been considThis study seeks to investigate the relationship between interest rates, liquidity, and leverage to non-financial companies in Indonesia who have issued bond securities between 2018 and 2023 with profitability as an intervening variable. Panel data regression analysis and path analysis are used in the study to explore the connections between the variables, both directly and indirectly. According to the results, bond ratings are heavily affected by interest rates, but liquidity does not appear to play a major role. Moreover, leverage appears to have a positive effect on bond ratings. Moreover, profitability is significantly influenced by interest rates, while leverage has a detrimental effect on profitability. The study suggests that there is a slight influence of profitability on the connection between interest rates and bond ratings, but not for liquidity or leverage. Interest rates are found to have a significant positive effect on bond ratings, whereas liquidity and leverage have minor direct impacts. These findings contribute to investors in making bond investment decisions, as well as for companies in optimizing their capital structure to improve bond ratings. This study suggests further development by expanding the coverage of other industry sectors and adding variables such as corporate governance and macroeconomic indicators to increase external and internal validity.

Keywords: Bond rating; Interest rate; Leverage; Liquidity; Profitability (search for similar items in EconPapers)
JEL-codes: G1 G24 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:econom:v:13:y:2025:i:1:p:213-229:n:1005

DOI: 10.2478/eoik-2025-0005

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