ANALYSIS OF FACTORS AFFECTING THE FINANCIAL DISTRESS ON BANKING INDUSTRY LISTED IN INDONESIA STOCK EXCHANGE

Abstract

This study aimed to investigate the affection of financial ratios to predict probability of financial distress on the banking industry. Financial ratios in this study using the indicators leverage ratio (debt to total assets ratio), liquidity ratio (current ratio), activity ratio (total assets turnover ratio), and profitability ratio (return on assets). The population in this study is all of the banking industry companies listed in the Indonesian Stock Exchange and continuously published financial statements in the year 2012-2016. Based on purposive sampling method, samples obtained are 35 companies in the period 2012-2016, so obtain 175 data. As for the criteria of financial distress in this study was measured by using Altman Z-Score, while statistical analysis that used in this study was multiple regression. The result of this research showed that leverage ratio (debt to total assets ratio), activity ratio (total assets turnover ratio), and profitability ratio (return on assets) has no significant influence towards financial distress. On the other hand, the liquidity ratio (current ratio) has a significant influence towards financial distress.