The Effect of Liquidity, Leverage, Profitability, and Corporate Social Responsibility on Financial Distress (A Study of the Construction Materials and Diversified Metals & Mining Subsectors Listed on the Indonesia Stock Exchange, 2020–2024)

Abstract

This research investigates how liquidity (CR), leverage (DER), profitability (ROA), and the environmental dimension of Corporate Social Responsibility (CSR) jointly influence financial distress, measured through the Altman Z-Score, in firms belonging to the Construction Materials and Diversified Metals & Mining sub-sectors on the Indonesia Stock Exchange (IDX) for the 2020–2024 period. A causal quantitative approach underpins the study. Purposive sampling identified seven qualifying firms, generating a panel of 35 firm-year observations. Secondary data were drawn from each firm's audited annual financial reports posted on the IDX's official site and were processed through panel regression in EViews 13. Findings indicate that liquidity (CR) exerts a positive and statistically significant influence on financial distress: firms holding adequate liquid resources are better positioned to cover short-term liabilities, which in turn lowers distress probability and reinforces financial resilience. Leverage (DER), profitability (ROA), and CSR, however, show no significant influence over the period studied. It is hoped these results can guide corporate managers, investors, and future scholars in identifying the drivers of financial distress, as captured by the Altman Z-Score, within Indonesia's basic-materials industry.