The Role of Profitability in Moderating the Effects of Leverage and Liquidity on Financial Distress in the Automotive Sector Listed on the IDX for the 2021–2025 Period

Authors

  • Faradilla Indah Nugraha Universitas 17 Agustus 1945 Samarinda
  • Imam Nazarudin Latif Universitas 17 Agustus 1945 Samarinda
  • Andi Indrawati Universitas 17 Agustus 1945 Samarinda
  • Catur Kumala Dewi Universitas 17 Agustus 1945 Samarinda

DOI:

https://doi.org/10.59141/jrssem.v6i1.1589

Keywords:

Leverage, Liquidity, Profitability, Financial Distress

Abstract

Financial distress remains an important concern for automotive companies because economic uncertainty, market fluctuations, rising production costs, and debt obligations can weaken corporate financial stability. This study examines the effects of leverage and liquidity on financial distress and evaluates the moderating role of profitability in automotive sector companies listed on the Indonesia Stock Exchange during 2021–2025. A quantitative explanatory approach was employed using secondary data from annual financial statements. The sample consisted of 13 automotive companies observed over five years, producing 65 panel-data observations. Data were analyzed with Stata 18 using descriptive statistics, classical assumption tests, panel-data model selection, fixed-effects regression, and moderation regression analysis with cluster-robust standard errors. The results show that leverage, proxied by the Debt to Asset Ratio, has no significant effect on financial distress. Liquidity, measured by the Current Ratio, has a positive and significant effect on the Altman Modified Z-Score, indicating that stronger liquidity reduces financial distress risk. Profitability, measured by Return on Assets, significantly moderates the effect of leverage on financial distress but does not moderate the effect of liquidity. In conclusion, liquidity is a key determinant of financial health, while profitability conditions the impact of leverage on financial distress in the automotive industry.

Downloads

Published

2026-08-21

How to Cite

Nugraha, F. I., Latif , I. N., Indrawati , A., & Dewi , C. K. (2026). The Role of Profitability in Moderating the Effects of Leverage and Liquidity on Financial Distress in the Automotive Sector Listed on the IDX for the 2021–2025 Period. Journal Research of Social Science, Economics, and Management, 6(1), 498–511. https://doi.org/10.59141/jrssem.v6i1.1589

Issue

Vol. 6 No. 1 (2026): Journal Research of Social Science, Economics, and Management

Section

Articles

License

Copyright (c) 2026 Faradilla Indah Nugraha, Imam Nazarudin Latif , Andi Indrawati , Catur Kumala Dewi

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  • Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International. that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  • Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  • Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.