The Effect of Debt to Equity Ratio and Price to Book Value on Financial Distress: Evidence from Transportation Companies Listed on the Indonesia Stock Exchange

Abstract

This study aims to determine the impact of the Debt-to-Equity Ratio (DER) and Price-to-Book Value (PBV) on financial distress among transportation sub-sector companies listed on the Indonesia Stock Exchange during the 2019–2024 period. This research employs a quantitative approach with an associative method. Secondary data were obtained from the annual financial reports of transportation sub-sector companies listed on the exchange for the 2019–2024 period. The study population consisted of 12 companies; a purposive sampling technique was used, resulting in a sample of five companies. Data analysis involved descriptive statistics and panel data regression, utilizing EViews 12 and Microsoft Excel software. Estimation and model selection procedures identified the Common Effect Model as the appropriate panel data regression model, yielding the equation: Z-score = 1.280760 - 0.286199 (DER) - 0.272671 (PBV). Hypothesis testing results indicate that the Debt-to-Equity Ratio and Price-to-Book Value simultaneously influence financial distress, with an Adjusted R-squared value of 30.38%. The research addresses gaps related to financial performance instability, high Debt-to-Equity Ratios, low Price-to-Book Values, and the risk of financial distress facing companies in Indonesia's transportation sub-sector, particularly during the 2019–2024 period. Examining these issues is crucial for providing empirical insights into the factors influencing financial distress and offering recommendations to corporate management, investors, and regulators regarding risk management and opportunities within the transportation sub-sector.