Linking Ownership Structure and Liquidity to Financial Distress: The Moderating Role of Profitability

Abstract

Financial distress is a critical issue that can threaten corporate sustainability, making it essential to identify the factors that may influence its occurrence. This study analyzes the impact of institutional ownership, managerial ownership, and liquidity on financial distress, with profitability as a moderating variable. The research focuses on non-primary consumer goods companies listed on the Indonesia Stock Exchange (IDX) for the period 2020–2024 and employs a quantitative method using panel data regression with the Random Effect Model (REM). The findings show that managerial ownership, institutional ownership, and liquidity do not significantly influence financial distress. In contrast, profitability has a positive and significant effect, indicating that higher profitability may increase financial distress risk, possibly due to overexpansion or aggressive investment strategies. Profitability does not strengthen the effect of managerial or institutional ownership on financial distress, but it significantly moderates the relationship between liquidity and financial distress. This suggests that companies with strong profitability can utilize liquidity more effectively to ease financial pressure. The study highlights that ownership structure alone is insufficient to prevent financial distress without solid financial performance. Companies are advised to maintain healthy profitability and manage liquidity effectively to enhance financial stability