Research Article
Does Diversification Strategy Reduce The Level of Financial Distress? (Evidence from Indonesia)
@INPROCEEDINGS{10.4108/eai.6-12-2018.2286274, author={Yeterina Widi Nugrahanti and Sutrisno T and Aulia Fuad Rahman and Endang Mardiati}, title={Does Diversification Strategy Reduce The Level of Financial Distress? (Evidence from Indonesia)}, proceedings={Proceedings of the 1st Sampoerna University-AFBE International Conference, SU-AFBE 2018, 6-7 December 2018, Jakarta Indonesia}, publisher={EAI}, proceedings_a={SU-AFBE}, year={2019}, month={8}, keywords={diversification financial distress altman z-score herfindahl index}, doi={10.4108/eai.6-12-2018.2286274} }- Yeterina Widi Nugrahanti
Sutrisno T
Aulia Fuad Rahman
Endang Mardiati
Year: 2019
Does Diversification Strategy Reduce The Level of Financial Distress? (Evidence from Indonesia)
SU-AFBE
EAI
DOI: 10.4108/eai.6-12-2018.2286274
Abstract
The objective of this study is to investigate the effect of diversification strategy towards the level of financial distress. Altman Z-score is used to measure the level of financial distress and Herfindahl index is used to measure diversification in this research. This study used 101 non-financial companies listed in Indonesian Stock Exchange during 2014-2016 (303 firm years) as samples. For testing the hypotheses, Mann Whitney test and panel data regression with random effect model was used. The results showed that there are Z score differences between high and low diversified firms; and diversification has a negative effect towards the level of financial distress. The control variables testing showed that liquidity, profitability, and firm size negatively influence the level of financial distress, while leverage has a positive effect towards the level of financial distress. Besides, the type of diversification has no effect toward financial distress.
