DETERMINANTS OF FINANCIAL PERFORMANCE: CAPITAL STRUCTURE, LIQUIDITY, AND COMPANY SIZE (A STUDY OF TECHNOLOGY SECTOR COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE (IDX) 2020-2024)

Abstract

Purpose: This study aims to examine the effect of capital structure, liquidity, and firm size on the financial performance of technology sector companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period.

Design/methodology/approach: This study employed a quantitative approach using secondary data obtained from the annual financial reports of technology companies listed on the IDX. The sample consisted of 25 companies selected through purposive sampling, resulting in 125 panel data observations. Panel data regression analysis was conducted using EViews 12, and the Common Effect Model (CEM) was selected as the most appropriate model based on the Chow and Lagrange Multiplier tests.

Findings: The empirical results reveal that capital structure has a positive and significant effect on financial performance, indicating that effective debt utilization can enhance company performance. Liquidity has a negative and significant effect on financial performance, suggesting that excessive current assets may reduce operational efficiency. Firm size has a positive and significant effect on financial performance, implying that companies with larger total assets tend to achieve better financial performance.

Practical implications: The findings provide practical insights for company management in determining financing policies, maintaining optimal liquidity levels, and utilizing company assets effectively to improve financial performance.

Originality/value: This study contributes to the literature by providing empirical evidence on the determinants of financial performance in Indonesia's technology sector using panel data regression analysis.

Paper type: Empirical