Negative Effect of Leverage on Financial Performance: The Case of Large Retail Companies in Indonesia in the Digital Era

Ely Siswanto, Vega Sukmawati, Lulu Nurul Istanti, Subagyo, Yuli Soesetio


Digitalization of trading retail has changed map competition business retail. This research examines the influence of liquidity, leverage, and good corporate governance on the financial performance of retail companies in Indonesia. This research also examines the role of moderation company size on the influence of these independent variables on financial performance. The observed population comprises companies in the retail industry listed on the Indonesia Stock Exchange (BEI) for 2016–2021. Data were obtained from the Company’s annual report published on the IDX website. Moderated regression analysis techniques were used to analyze the moderating role of firm size on the impact of leverage on financial performance. The results showed that variable leverage negatively influences financial performance and liquidity, GCG does not impact financial performance, and the size of the company can afford to moderate the effect of leverage on financial performance. Large companies must be more careful in conducting debt funding policies because the risk of financial distress is higher than that of small companies. This research reveals the latest condition of retail companies in Indonesia after the COVID-19 outbreak and the rise of online shopping.


Keywords: liquidity, leverage, good corporate governance, financial performance, company size.



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