THE INFLUENCE OF PROFITABILITY AND LIQUIDITY TOWARDS FINANCIAL DISTRESS AND INSTITUTIONAL OWNERSHIP AS MODERATING VARIABLE

Abstract

Apart from looking at the financial statements, financial distress can also be caused by internal factors such as poor internal management and external factors such as the pandemic condition due to the Covid-19 virus which occured since 2019. The Covid-19 pandemic has disrupted normal life and triggered economic reduction all around the world. The property and real estate sector was one of the most affected sector by Covid-19. Most property prices had been dramatically dropped. The purpose of this study was to examine the effect of profitability and liquidity on financial distress and the role of institutional ownership in moderating the effect of profitability and liquidity on financial distress. The object of this research is the property and real estate sector which listed on the Indonesia Stock Exchange during 2018-2022 period. This research used 225 samples taken using purposive sampling technique. Data analysis was carried out with panel data regression. The results of this research is that profitability has a significant effect on financial distress, while liquidity and institutional ownership do not have a significant effect on financial distress. In addition, this research shows that institutional ownership can strengthen the influence of profitability on financial distress but weaken the effect of liquidity on financial distress.