Profitability of Manufacturing Firms in Indonesia Amidst the Pandemic
Abstract
Research Originality: In the realm of manufacturing firms, the pursuit of profitability remains a foremost concern. This paper distinguishes itself through its innovative approach, integrating key factors such as liquidity, leverage, activity, and the influence of the COVID-19 pandemic. Utilizing panel regression analysis, the study scrutinizes Indonesia's total manufacturing firms to shed light on this critical issue.
Research Objectives: This study primarily aims to evaluate the profitability of manufacturing firms in Indonesia. It specifically delves into the impact of liquidity, leverage, and activity measures on profitability, while also examining how the COVID-19 pandemic factors into this equation.
Research Methods: Employing a quantitative approach, this study utilizes panel data gathered from 134 manufacturing firms in Indonesia spanning from 2018 to 2023. The analysis relies on a panel regression model to draw insights.
Empirical Results: The analysis yields significant findings. Notably, leverage demonstrates a negative and statistically significant influence on manufacturing firms' profitability, whereas firm activity shows a positive and statistically significant effect. Conversely, liquidity and the COVID-19 pandemic appear to have negligible impacts on profitability.
Implications: These findings hold critical implications for policymakers and practitioners within Indonesia's manufacturing sector. To bolster the profitability of manufacturing firms, policymakers should prioritize reducing leverage and fostering increased company activity, possibly through amplified sales efforts.
JEL Classification: G32, G33, G01, L60
How to Cite:
Khalifaturofi’ah, S. O., & Setiawan, R. (2024). Profitability of Manufacturing Firms in Indonesia Amidst the Pandemic. Etikonomi, 23(2), 497-510. htttps://doi.org/10.15408/etk.v23i2.35169.
Keywords
References
Agegnew, A., & Gujral, T. (2022). Determinants of Profitability : Evidence From Selected Manufacturing Company In Hawassa , Ethiopia. Journal of Positive School Psychology, 6(6), 8309–8322.
Alarussi, A. S., & Gao, X. (2023). Determinants of Profitability in Chinese Companies. International Journal of Emerging Markets, 18(10), 4232–4251. https://doi.org/10.1108/IJOEM-04-2021-0539.
Arifiana, R., & Khalifaturofi’ah, S. O. (2022). The Effect of Financial Ratios in Predicting Financial Distress in Manufacturing Companies. Jurnal Riset Bisnis Dan Manajemen, 15(2), 103–108.
Aryantini, S., & Jumono, S. (2021). Profitability and Value of Firm: An Evidence from Manufacturing Industry in Indonesia. Accounting, 7(4), 735–746. https://doi.org/10.5267/j.ac.2021.2.011.
Budagaga, A. R. (2022). The Validity of the Irrelevant Theory in Middle East and North African Markets: Conventional Banks versus Islamic Banks. Journal of Financial Economic Policy, 14(4), 491–514. https://doi.org/10.1108/JFEP-06-2021-0148.
Devi, S., Warasniasih, N. M. S., & Masdiantini, P. R. (2020). The Impact of COVID-19 Pandemic on the Financial Performance of Firms on the Indonesia Stock Exchange. Journal of Economics, Business, & Accountancy Ventura, 23(2), 226–242. https://doi.org/10.14414/jebav.v23i2.2313.
El-Chaarani, H., Abraham, R., & Azzi, G. (2023). The Role of Liquidity Creation in Managing the COVID-19 Banking Crisis in Selected Mena Countries. International Journal of Financial Studies, 11(1), 39. https://doi.org/10.3390/ijfs11010039.
Fujianti, L., Munira, M., & Tindaon, S. L. (2022). The Comparison Analysis of Indonesian Company’s Financial Performance Before and During the Covid-19 Pandemic. Inquisitive, 2(2), 89–99.
Gaisani, M. P., Fahmi, I., & Sasongko, H. (2021). The Effect of Covid-19 on The Financial Performance of Indonesia’s Livestock Industry. Jurnal Manajemen dan Agribisnis, 18(3), 229–239. https://doi.org/10.17358/jma.18.3.229.
Halfiyyah, S. O., & Suriawinata, I. S. (2019). The Effect of Capital Structure, Profitability, and Size to Firm Value of Property and Real Estate at Indonesia Stock Exchange In the Period of 2012-2018. Indonesian Journal of Business, Accounting and Management, 2(01), 69–76. https://doi.org/10.36406/ijbam.v2i02.424.
Homayoun, S., Velashani, M. A. B., Abbas Alkhafaji, B. K., & Jabbar Mezher, S. (2023). The Effect of COVID-19 on the Performance of SMEs in Emerging Markets in Iran, Iraq and Jordan. Sustainability, 15(10), 1–14. https://doi.org/10.3390/su15107847.
Hossain, T. (2021). Determinants of Profitability: A Study on Manufacturing Companies Listed on the Dhaka Stock Exchange. Asian Economic and Financial Review, 10(12), 1496–1508. https://doi.org/10.18488/JOURNAL.AEFR.2020.1012.1496.1508.
Ifeduni, A. S., & Charles, O. (2018). The Determinants of Profitability of Manufacturing Firms in Nigeria. International Journal of Economics, Commerce, and Management, 6(4), 479–493.
Khalifaturofi’ah, S. O., Indra Listyarti, & Ririn Poerwanti. (2023). Determinants of Conventional Bank Profitability: Is Covid-19 Matter? Jurnal Manajemen, 27(3), 535–555. https://doi.org/10.24912/jm.v27i3.1298.
Lambey, R. (2021). The Effect of Profitability, Firm Size, Equity ownership, and Firm Age on Firm Value (Leverage Basis): Evidence from the Indonesian Manufacturer Companies. Archives of Business Research, 9(1), 128–139. https://doi.org/10.14738/abr.91.9649.
Malahayati, M., Masui, T., & Anggraeni, L. (2021). An Assessment of the Short-Term Impact of COVID-19 on Economics and the Environment: A Case Study of Indonesia. EconomiA, 22(3), 291–313. https://doi.org/10.1016/j.econ.2021.12.003.
Oktarina, D. (2018). The Analysis of Firm Value in Indonesia Property and Real Estate Companies. International Journal of Research Science & Management, 5(9), 85–92. https://doi.org/10.5281/zenodo.1462022.
Parlindungan, S., & Dewi, V. I. (2022). Factors Affecting The Firm Value Of Property and Real Estate Companies: Evidence From Indonesia as Listed on The Indonesian Stock Exchange. Economics and Education Online Journalpradika, 20(1), 23–36.
Pervan, M., Pervan, I., & Ćurak, M. (2019). Determinants of Firm Profitability in the Croatian Manufacturing Industry: Evidence from Dynamic Panel Analysis. Economic Research-Ekonomska Istrazivanja , 32(1), 968–981.
Pratiwi, Y., Kurniasih, A., Management, S. P., & Buana, U. M. (2021). Determinants of Profitability of Property and Real Estate Companies Listed on Stock Exchange: The Case of Indonesia. International Humanities and Applied Sciences Journal, 4(1), 1–12.
Qadri, S. U., Ma, Z., Raza, M., Li, M., Qadri, S., Ye, C., & Xie, H. (2023). COVID-19 and Financial Performance: Pre and Post Effect of COVID-19 on Organization Performance; A Study Based on South Asian Economy. Frontiers in Public Health, 10. https://doi.org/10.3389/fpubh.2022.1055406.
Saady, N., Pradiani, T., & Handoko, Y. (2020). The Effect of the Third Party Funds on People’s Business Credit and Micro Business Segment Profitability. Jurnal Pendidikan Bisnis dan Manajemen, 6(1), 42–53. https://doi.org/10.17977/um003v6i12020p042.
Sethi, P., Sahu, T. N., & Maity, S. (2023). Firm Performance, Vertical Agency Crisis and Corporate Governance of Indian Listed Companies. Asian Journal of Economics and Banking, 7(1), 86–98. https://doi.org/10.1108/ajeb-01-2022-0003.
Škuflić, L., Mlinarić, D., & Družić, M. (2016). Determinants of Firm Profitability in Croatia’s Manufacturing Sector. International Conference on Economic and Social Studies, 269–282.
Soukotta, A., Cakranegara, P. A., Hanis, R., Kurniawan, Y. J., Pattimura, U., Presiden, U., Pontianak, I., & Trisakti, S. (2023). Determination Of Firm Value In The Real Estate Sector On The Indonesian Stock Exchange. Jurnal Ekonomi, 12(02), 1049–1055.
Sudiyatno, B., Puspitasari, E., Nurhayati, I., & Rijanti, T. (2021). The Relationship Between Profitability and Firm Value: Evidence From Manufacturing Industry in Indonesia. International Journal of Financial Research, 12(3), 466. https://doi.org/10.5430/ijfr.v12n3p466.
Sulitiyani, & Noor, S. M. (2022). Analysis of Profitability Determinants and Effect Value of Automotive Companies in Indonesia. Asian Journal of Economics, Business and Accounting, 3(3), 26–35. https://doi.org/10.9734/ajeba/2022/v22i2230707.
Susan, M., Winarto, J., & Gunawan, I. (2022). The Determinants of Corporate Profitability in Indonesia Manufacturing Industry. Review of Integrative Business and Economics Research, 11(1), 184-192.
Susilo, D., Wahyudi, S., & Pangestuti, I. R. D. (2020). Profitability Determinants of Manufacturing Firms in Indonesia. International Journal of Economics and Business Administration, 8(2), 53–64. https://doi.org/10.35808/ijeba/443.
Syafitri, E. D., & Khalifaturofi’ah, S. O. (2023). Dampak pandemi Covid-19 terhadap kinerja keuangan perusahaan manufaktur yang terdaftar di BEI. Journal of Business & Banking, 13(1), 33. https://doi.org/10.14414/jbb.v13i1.3734
Tailab, M. (2014). Analyzing Factors Effecting Profitability of Non-Financial U.S. Firms. Research Journal of Finance and Accounting, 5(22), 17–27.
Tao, Q., Zahid, Z., Mughal, A., & Shahzad, F. (2022). Does Operating Leverage Increase Firm’s Profitability and Bankruptcy Risk? Evidence from China’s Entry into WTO. International Journal of Finance and Economics, 27(4), 4705–4721. https://doi.org/10.1002/ijfe.2395.
Taruli, J. S., & Panggabean, R. R. (2019). Factors Affecting Profitability: Evidence from Indonesia and Malaysia. Prosiding Industrial Research Workshop and National Seminar, 10(1), 982–991.
Tui, S., Nurnajamuddin, M., Sufri, M., & Nirwana, A. (2017). Determinants of Profitability and Firm Value: Evidence from Indonesian Banks. IRA-International Journal of Management & Social Sciences, 7(1), 84-93. https://doi.org/10.21013/jmss.v7.n1.p10.
Wahyuni, S., Pujiharto, Azizah, S. N., & Zulfikar. (2021). Impact of the COVID-19 Pandemic and New Normal Implementation on Credit Risk and Profitability of Indonesian Banking Institutions. Banks and Bank Systems, 16(3), 104–112. https://doi.org/10.21511/bbs.16(3).2021.10.
Yuen, M. K., Ngo, T., Le, T. D. Q., & Ho, T. H. (2022). The Environment, Social and Governance (ESG) Activities and Profitability Under COVID-19: Evidence from the Global Banking Sector. Journal of Economics and Development, 24(4), 345–364. https://doi.org/10.1108/jed-08-2022-0136.
DOI: 10.15408/etk.v23i2.35169
Refbacks
- There are currently no refbacks.
Copyright (c) 2024 Sholikha Oktavi Khalifaturofi'ah
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
