Strategy to Prevent Financial Distress Through Increasing Business Efficiency, Utilizing Intellectual Capital and Implementing Good Corporate Governance

Anita Anggraeni; Imam Subekti; Roekhudin

doi:10.22219/jrak.v15i3.40465

Authors

Anita Anggraeni Magister Accounting, Faculty of Economic and Business, Brawijaya University, Malang, Indonesia
Imam Subekti Magister Accounting, Faculty of Economic and Business, Brawijaya University, Malang, Indonesia
Roekhudin Magister Accounting, Faculty of Economic and Business, Brawijaya University, Malang, Indonesia

DOI:

https://doi.org/10.22219/jrak.v15i3.40465

Keywords:

Business Efficiency, Corporate Governance, Financial Distresss, Intellectual Capital

Abstract

Research Objectives:

This study aims to examine the effect of business efficiency, intellectual capital proxied by value added capital employed and corporate governance proxied by the recommendations of the board of commissioners on financial distress.

Methodology/approach:

The population of this study consists of manufacturing companies listed on the Indonesia Stock Exchange during the 2021–2023 period. The sampling technique employed was purposive sampling, resulting in a sample of 208 companies over three years, totaling 628 firm-year observations. The hypothesis testing methods used in this study include confirmatory factor analysis (CFA) and multiple regression analysis.

Findings:

Based on the results of this study, the effect of business efficiency on financial distress has a positive but insignificant effect, the effect of intellectual capital added value proxied by physical and financial capital added value has a positive effect. In addition, the implementation of corporate governance proxied by the recommendation of the board of commissioners and audit committee expertise has a negative and significant effect on financial distress.

Practical implications:

This study contributes to companies and investors in minimizing the occurrence of financial distress.

Originality/value:

Corporate governance in this study is measured based on the Financial Services Authority (OJK) regulations, focusing on the aspect of expertise. Specifically, it includes the educational background of the audit committee and the recommendations of the board of commissioners, which are assessed through the board’s supervisory performance. This study also provides empirical evidence on the prediction of financial distress by examining several key variables, such as business efficiency and intellectual capital, which can serve as early warning indicators to help companies anticipate potential financial distress.

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Author Biographies

Imam Subekti, Magister Accounting, Faculty of Economic and Business, Brawijaya University, Malang, Indonesia

Imam Subekti is a lecturer at the Department of Accounting, Faculty of Economics and Business, Brawijaya University, Indonesia. Their research interests include corporate governance, corporate finance, and financial distress prediction. They are currently focusing on research involving business efficiency and intellectual capital in manufacturing firms. his rank is number 2 from 31 scientist in major economics on brawijaya university source by scientific index 2025

Roekhudin, Magister Accounting, Faculty of Economic and Business, Brawijaya University, Malang, Indonesia

Roekhudin is a faculty member at the Department of Magister Accounting, Faculty of Economics and Business, Brawijaya University, Indonesia. Their main research interests are corporate governance, company efficiency, and financial distress prediction. In addition to teaching, they are actively involved in research and academic publications, particularly focusing on the performance of companies in the manufacturing sector.

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