Intellectual Capital, Leverage, Firm Size and Its Impact on Financial Distress

Abstract

The World Bank noted that since the end of 2015, Indonesian manufacturing companies have decreased their share of Indonesia's GDP until 2020. The data showed that there is a slowdown in the performance of Indonesian manufacturing companies, which causing financial distress. The study aims to determine which factors or variables can reduce or increase the risk of financial distress. Based on the background, suggestions and previous study. This study uses research objects specifically in Indonesian manufacturing companies that experienced financial distress in 2016-2020. This study uses three independent variables, namely intellectual capital, leverage, firm size, and one dependent variable, namely financial distress. Therefore, this study aims to know the effect of three independent variables toward financial distress. Indonesian manufacturing companies active on the Indonesia Stock Exchangefor the period 2016-2020 are the population of thuis study. The sampling technique of this study was purposive sampling, and 30 manufacturing companies that experienced financial distress were selected as samples with 150 observations. Multiple linear regression models with a panel data approach and classical assumption tests were used for analysis. The result shows that Intellectual Capital and Firm Size have negative impacts, and leverage has positive impacts towards financial distress significantly.