The Effect of Liquidity and Leverage on Z-Score as a Predictor of Financial Distress, with Profitability as a Mediating Variable (A Study of Coal Sub-Sector Companies Listed on the Indonesia Stock Exchange)

Abstract

This study aims “to analyze the influence of liquidity and leverage on the Z-score, as a predictor of financial distress, with profitability serving as a mediating variable.” The study population consists of 33 coal sub-sector companies listed on the IDX, with a sample of six companies selected using the purposive sampling method. Data analysis was conducted using panel data regression. The findings indicate that liquidity and leverage do not affect the Z-score, whereas profitability has a positive and significant effect. Liquidity does not influence profitability, while leverage has a positive and significant effect on profitability. Furthermore, profitability was found to mediate the influence of liquidity and leverage on the Z-score.