Financial Metrics for Distress Prediction in Indonesia’s Property and Real Estate Sector

Intan Nurul Awwaliyah, Roni Widodo (), Marmono Singgih, Arnis Budi Susanto and Ema Desia Prajitiasari
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Intan Nurul Awwaliyah: University of Jember
Roni Widodo: University of Jember
Marmono Singgih: University of Jember
Arnis Budi Susanto: University of Jember
Ema Desia Prajitiasari: University of Jember

A chapter in Proceedings of the 5th International Conference on Global Innovation and Trends in Economy 2024 (INCOGITE 2024), 2024, pp 189-202 from Springer

Abstract: Abstract In recent years, the Property and Real Estate sector has faced stagnation and decline attributed to various factors. Dynamic property development regulations and the disruptive presence of Covid-19 have imposed constraints on economic activity, hampering growth within the industry. Businesses in the Property and Real Estate sector are more vulnerable to financial difficulties as a result of this restricted growth. This study’s main goal is to conduct an empirical investigation into the relationship between the occurrence of financial distress and important financial parameters such as profitability, liquidity, leverage, activity, and cash flow. The analysis uses 45 firms that are listed between 2017 and 2021 and are sampled from the Indonesia Stock Exchange. The debt-to-assets ratio (DAR) serves as a proxy for leverage, return on assets (ROA) serves as a proxy for profitability, current ratio (CR) serves as a proxy for liquidity, total asset turnover (TATO) serves as a proxy for activity, and cash flow to total assets (CFO/TA) serves as a proxy for cash flow. The results of this analysis reveal significant findings: ROA, TATO, and CFO/TA exhibit a substantial negative impact on financial distress, while DAR demonstrates a significant positive effect. Surprisingly, the CR variable exhibits no significant influence on financial distress.

Keywords: Financial Distress; Profitability; Liquidity; Leverage; Cash Flow (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-585-0_14

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