An Analysis of Financial Distress Determinants in Indonesia's Micro and Small Enterprises




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.


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How to Cite

Marsenne, M., Ismail, T., Taqi, M., & Hanifah, I. A. (2023). An Analysis of Financial Distress Determinants in Indonesia’s Micro and Small Enterprises. International Journal of Professional Business Review, 8(11), e03327.