The role of moderating audit quality relationship between corporate characteristics and financial distress in the Indonesian mining sector
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Received February 7, 2020;Accepted May 5, 2020;Published May 18, 2020
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Author(s)Link to ORCID Index: https://orcid.org/0000-0002-0221-3910
, Martua Eliakim Tambunan , Eva Rohima Kumullah
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DOIhttp://dx.doi.org/10.21511/imfi.17(2).2020.08
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Article InfoVolume 17 2020, Issue #2, pp. 88-100
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Creative Commons Attribution 4.0 International License
Financial performance and corporate governance play an important role in financial distress in the mining sector, which is one of the most significant contributors to the Indonesian economy. This study aims to analyze the effect of corporate characteristics on financial distress (FD), which is moderated by corporate governance (audit quality), and uses the controlling variables (inflation rate and GDP). The study uses data from audited financial statements from mining sector in the Indonesia Stock Exchange for the period 2013–2018. Since the dependent variable (FD) is dichotomous, this study used a binary logistic regression model, as it is the case in many studies regarding the probability of bankruptcy filing. In line with the current study and some previous studies, leverage, efficiency (activity), market-to-book value, audit quality, and GDP affect the probability of financial distress significantly. Only liquidity and inflation do not impact FD. Besides, the moderating audit quality weakens the effect of liquidity and PBV; otherwise, it strengthens leverage and efficiency in predicting financial distress. As for managerial implications, this study concludes that corporate performance, corporate governance, and macro-risk factors affect the probability of financial distress. The authors suggest that mining firms need to pay attention to corporate governance and should watch the economic condition for business sustainability.
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JEL Classification (Paper profile tab)G30, G32, G33
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References51
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Tables4
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Figures0
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- Table 1. Description of variables
- Table 2. Descriptive statistics
- Table 3. Correlation analysis
- Table 4. Logistic regression results
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Conceptualization
Perdana Wahyu Santosa, Martua Eliakim Tambunan
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Formal Analysis
Perdana Wahyu Santosa, Eva Rohima Kumullah
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Funding acquisition
Perdana Wahyu Santosa, Martua Eliakim Tambunan
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Methodology
Perdana Wahyu Santosa, Martua Eliakim Tambunan, Eva Rohima Kumullah
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Resources
Perdana Wahyu Santosa, Martua Eliakim Tambunan
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Supervision
Perdana Wahyu Santosa, Martua Eliakim Tambunan
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Writing – original draft
Perdana Wahyu Santosa, Martua Eliakim Tambunan
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Writing – review & editing
Perdana Wahyu Santosa
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Validation
Martua Eliakim Tambunan, Eva Rohima Kumullah
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Data curation
Eva Rohima Kumullah
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Investigation
Eva Rohima Kumullah
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Software
Eva Rohima Kumullah
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Conceptualization
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