AUDIT QUALITY AS MODERATOR AND PROFITABILITY AS MEDIATOR: A DUAL-PROCESS MODEL OF FINANCIAL DISTRESS DETERMINANTS IN INDONESIAN PROPERTY SECTOR
Abstract
Financial distress describes a company’s critical financial condition that risks leading to insolvency if not properly managed. This issue is particularly prevalent in the property and real estate industries, which are vulnerable to economic shocks such as the COVID-19 pandemic (2021–2022), high inflation (2023), and Bank Indonesia’s interest rate hikes (2024) that increased debt burdens. Financial distress arises from asset-liability imbalances, declining liquidity that hinders short-term debt payments, and high leverage that limits a firm’s ability to meet obligations, often triggering debt restructuring or forced asset sales. Wulandari and Nugraha (2022) suggest risk assessment models such as the Altman Z-Score, Springate, and Grover as effective tools for small to medium-sized Indonesian firms. The Financial Services Authority (OJK) reported a 25% decline in property transactions (2021–2022) and a 10–15% increase in construction costs (2023– 2024), which squeezed profit margins. Therefore, declining profits in this sector during 2021–2024 may serve as early indicators of distress, requiring in-depth audits, income diversification, or government support to prevent mass bankruptcies. The population in this study comprises all companies listed on the Indonesia Stock Exchange (IDX) in the property and real estate sector during 2021–2024. This research employs purposive sampling to obtain representative samples based on predetermined criteria.
Keywords:
Financial Distress Property and Real Estate Sector Grover Financial Ratios Earnings ManagementReferences
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