The Model of Financial Distress in the Pharmaceutical Industry

  • Reschiwati, Fran Sayekti, Rr Dimas Veronica Priharti, Hafidz Muhammad Arsyad


The current weakening of the rupiah will have an important impact on the industry in obtaining raw materials. The pharmaceutical industry in Indonesia still uses around 90% of its raw materials from imports. This can affect finances that can bring financial distress. This study aimed to determine the effect of liquidity (Cash Ratio), profitability (ROE), Solvency (DAR), and Inflation on Financial Distress (Z "-Score). This research was conducted at the company Pharmaceutical industry sector listed on the Indonesia Stock Exchange. The population of this research is all companies that have listed on the Indonesia Stock Exchange with the research period 2014 through to 2018. After passing through the sample selection stage, the number of companies that meet the criteria of the sample is as much as 5 pharmaceutical companies sub-sector. This research using descriptive analysis techniques and multiple linear regression analysis with methods Random Effect Model (REM). The results showed that Liquidity (Cash Ratio) had a significant positive effect; Solvency (DAR) and inflation have a significant negative effect on Financial Distress (Z "- Score). While profitability (ROE) has no effect on Financial Distress (Z ”-Score).