Profitability, Liquidity, and Firm Value: Does Financial Distress Have a Mediating Effect?

Study of Manufacturing Companies in Indonesia

DOI

10.2991/aebmr.k.211124.062How to use a DOI?

Keywords

Financial distress; Financial performance; Firm value; Liquidity; Profitability

Abstract

Profitability and liquidity are essential factors in investor evaluation. The increased profitability and liquidity value reduces the risk of a company going bankrupt. This study examines the role of financial distress in the relationship between profitability and liquidity. The research looked at 170 industrial companies listed on IDX for 2016-2020. The data were analyzed using PLS (Partial Least Square). Profitability and Firm Value are perfectly mediated by financial distress, with Liquidity as the independent variable. The study’s major finding is that profitability and liquidity have no direct impact on firm value, but financial distress does. Signal theory states that information about financial circumstances that are not in financial distress might encourage investors to invest, hence increasing Firm Value. This research contributes to the literature on the impact of Financial Distress in predicting the influence of Profitability and Liquidity on boosting Firm Value.

Copyright

© 2021 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

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TY  - CONF
AU  - Melinda Dewi
AU  - Gabriella Natasya Foanto
AU  - Yulius Jogi Christiawan
PY  - 2021
DA  - 2021/11/25
TI  - Profitability, Liquidity, and Firm Value: Does Financial Distress Have a Mediating Effect?
BT  - Proceedings of the 6th International Conference on Tourism, Economics, Accounting, Management, and Social Science (TEAMS 2021)
PB  - Atlantis Press
SP  - 437
EP  - 445
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.211124.062
DO  - 10.2991/aebmr.k.211124.062
ID  - Dewi2021
ER  -