Moderating Role of Liquidity Ratio: A Look at Firm Performance in Indonesia
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Abstract
This research investigates the impact of corporate income tax, asset turnover, and liquidity on firm performance, as measured by Tobin's Q, in Indonesian non-financial listed companies between 2013 and 2023. Employing panel data analysis, we find that higher corporate income tax rates negatively affect firm performance. While asset turnover and liquidity ratio exhibit less significant impacts, our analysis reveals that liquidity plays a moderating role in the relationship between asset turnover and firm performance. These findings emphasize the significance of effective liquidity management and efficient asset utilization for improving corporate performance and stimulating economic growth in Indonesia.
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How to Cite
Jeanyfer, J., & Nugroho, V. (2024). Moderating Role of Liquidity Ratio: A Look at Firm Performance in Indonesia. Enrichment : Journal of Management, 14(5), 916-924. https://doi.org/10.35335/enrichment.v14i5.2131
References
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Adefunke, A. B., & Usiomon, A. O. (2022). IMPACT OF COMPANY INCOME TAX ON CORPORATE PROFITABILITY IN NIGERIA. Indian Journal of Finance and Banking, 104–114. https://doi.org/10.46281/ijfb.v9i1.1567
Adejare, T., Saheed Akande, S., & Adejare, T. (2017). The Impact of Value Added Tax on Private Investment in Nigeria. Account and Financial Management Journal, 2(4), 644–651. https://doi.org/10.18535/afmj/v2i4.03
Ado, A. B., Rashid, N., Mustapha, A., & Saheed Ademola, L. (2021). THE IMPACT OF CORPORATE TAX PLANNING ON THE FINANCIAL PERFORMANCE OF LISTED COMPANIES IN NIGERIA. In International Journal of Economics (Vol. 29, Issue 2).
Ahmad, N., Mobarek, A., & Roni, N. N. (2021). Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis. Cogent Business & Management, 8(1), 1900500.
Ahmad, N., Shah, F. N., Ijaz, F., & Ghouri, M. N. (2023). Corporate income tax, asset turnover and Tobin’s Q as firm performance in Pakistan: Moderating role of liquidity ratio. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2023.2167287
Amendola, A., Boccia, M., Mele, G., & Sensini, L. (2023). Do fiscal policies affect the firms’ growth and performance? Urban versus rural area. Eurasian Economic Review, 13(1), 1–33. https://doi.org/10.1007/s40822-022-00223-7
Arora, T., & Gill, S. (2021). Impact of corporate tax aggressiveness on firm value: evidence from India. Managerial Finance, ahead-of-print. https://doi.org/10.1108/MF-01-2021-0033
Auerbach, A. (1983). Taxation, Corporate Financial Policy, andthe Cost of Capital. Journal of Economic Literature (Sep-Tember 1983), 905–940.
Barney, J., & Clark, D. (2023). Resource-Based Theory: Creating and Sustaining Competitive Advantage. https://doi.org/10.1093/oso/9780199277681.001.0001
Brigham, E. F. ., & Daves, P. R. . (2007). Intermediate financial management. Thomson/South-Western.
Cano, C., Carrillat, F., & Jaramillo, F. (2004). A Meta-Analysis of the Relationship Between Market Orientation and Business Performance: Evidence From Five Continents. International Journal of Research in Marketing, 21, 179–200. https://doi.org/10.1016/j.ijresmar.2003.07.001
Chancharat, N., & Kumpamool, C. (2022). Working capital management, board structure and Tobin’s q ratio of Thai listed firms. Managerial Finance, ahead-of-print. https://doi.org/10.1108/MF-08-2021-0361
Chow, T., Huang, S., Klassen, K., & Ng, J. (2021). The Influence of Corporate Income Taxes on Investment Location: Evidence from Corporate Headquarters Relocations. Management Science, 68. https://doi.org/10.1287/mnsc.2020.3906
De Simone, L., Klassen, K. J., & Seidman, J. K. (2022). The effect of income-shifting aggressiveness on corporate investment. Journal of Accounting and Economics, 74(1), 101491. https://doi.org/https://doi.org/10.1016/j.jacceco.2022.101491
Durrah, O., Aziz, A., Rahman, A., Jamil, S. A., & Ghafeer, A. (2016). International Journal of Economics and Financial Issues Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study on Food Industrial Companies Listed in Amman Bursa. International Journal of Economics and Financial Issues |, 6(2), 435–441. http:www.econjournals.com
Frumusanu, N.-M., Breuer, A., & Lighezan Breuer, B. (2018). CASH AND LIQUIDITY/LIQUIDITY AND LIQUIDITY RATIO. http://conta.money.ro/dictionar_
Grinstein, A. (2008). The relationships between market orientation and alternative strategic orientations: A meta-analysis. European Journal of Marketing, 42(1–2), 115–134. https://doi.org/10.1108/03090560810840934
Hall, R. E., & Jorgenson, D. W. (1969). Tax policy and investment behavior: Reply and further results. The American Economic Review, 59(3), 388–401.
Ispriyarso, B., & Wibawa, K. C. S. (2023). Reconstruction of the national economy post-covid-19 pandemic: Critical study of tax reforms in Indonesia. Cogent Social Sciences, 9(1). https://doi.org/10.1080/23311886.2023.2174517
Karim, A., Widyarti, E. T., & Santoso, A. (2023). Effect of current ratio, total asset turnover, and size on profitability: Evidence from Indonesia manufacturing companies. Diponegoro International Journal of Business, 6(1), 57–63. https://doi.org/10.14710/dijb.6.1.2023.57-63
Lazăr, S., & Istrate, C. (2018). Corporate tax-mix and firm performance. A comprehensive assessment for romanian listed companies. Economic Research-Ekonomska Istrazivanja , 31(1), 1258–1272. https://doi.org/10.1080/1331677X.2018.1482225
Nuur, A. A., Komara, E. F., Jenderal, U., Yani, A., & Nuur, A. A. (2024). The Effect Of Current Ratio, Debt To Assets Ratio, Total Assets Turnover, And Company Size On Company Value (Tobin’s Q) In Coal Sub Sector Companies Listed On The Indonesia Stock Exchange Period. EKOMBIS REVIEW: Jurnal Ilmiah Ekonomi Dan Bisnis, 12(3), 12. https://doi.org/10.37676/ekombis.v12i3
Oz-Yalaman, G. (2019). The effects of corporate tax rate on the firm performance. In Handbook of Research on Strategic Fit and Design in Business Ecosystems (pp. 640–669). IGI Global. https://doi.org/10.4018/978-1-7998-1125-1.ch028
Poterba, J. M., & Summers, L. H. (1983). Dividend taxes, corporate investment, and ‘Q.’ Journal of Public Economics, 22(2), 135–167. https://doi.org/10.1016/0047-2727(83)90063-4
Ramadan, M. M., & Hassan, M. K. (2022). Board gender diversity, governance and Egyptian listed firms’ performance. Journal of Accounting in Emerging Economies, 12(2), 279–299. https://doi.org/10.1108/JAEE-02-2021-0057
Robinson, T. R., Hendry, E., Pirie, W. L., & Broihahn, M. A. (2015). INTERNATIONAL FINANCIAL STATEMENT ANALYSIS (3rd ed.). John Wiley & Sons, Inc.,.
Sameera, H. (2018). Do Resource Based View Spur Firm Performance? A Literature Review. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3280094
Sureth, C., & Langeleh, D. (2007). The Degree of Integrating Corporate and Capital Gains Tax into Income Tax and its Impact on Investment Decisions. Schmalenbach Business Review (Sbr), 59(4), 310–339. https://EconPapers.repec.org/RePEc:sbr:abstra:v:59:y:2007:i:4:p:310-339
Tobin, J. (1969). A general equilibrium approach to monetary theory. Journal of Money, Credit and Banking, 1(1), 15–29.
Wali, K. (2021). The detection of earnings management through a decrease of corporate income tax. Future Business Journal, 7(1). https://doi.org/10.1186/s43093-021-00083-8
Adefunke, A. B., & Usiomon, A. O. (2022). IMPACT OF COMPANY INCOME TAX ON CORPORATE PROFITABILITY IN NIGERIA. Indian Journal of Finance and Banking, 104–114. https://doi.org/10.46281/ijfb.v9i1.1567
Adejare, T., Saheed Akande, S., & Adejare, T. (2017). The Impact of Value Added Tax on Private Investment in Nigeria. Account and Financial Management Journal, 2(4), 644–651. https://doi.org/10.18535/afmj/v2i4.03
Ado, A. B., Rashid, N., Mustapha, A., & Saheed Ademola, L. (2021). THE IMPACT OF CORPORATE TAX PLANNING ON THE FINANCIAL PERFORMANCE OF LISTED COMPANIES IN NIGERIA. In International Journal of Economics (Vol. 29, Issue 2).
Ahmad, N., Mobarek, A., & Roni, N. N. (2021). Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis. Cogent Business & Management, 8(1), 1900500.
Ahmad, N., Shah, F. N., Ijaz, F., & Ghouri, M. N. (2023). Corporate income tax, asset turnover and Tobin’s Q as firm performance in Pakistan: Moderating role of liquidity ratio. Cogent Business and Management, 10(1). https://doi.org/10.1080/23311975.2023.2167287
Amendola, A., Boccia, M., Mele, G., & Sensini, L. (2023). Do fiscal policies affect the firms’ growth and performance? Urban versus rural area. Eurasian Economic Review, 13(1), 1–33. https://doi.org/10.1007/s40822-022-00223-7
Arora, T., & Gill, S. (2021). Impact of corporate tax aggressiveness on firm value: evidence from India. Managerial Finance, ahead-of-print. https://doi.org/10.1108/MF-01-2021-0033
Auerbach, A. (1983). Taxation, Corporate Financial Policy, andthe Cost of Capital. Journal of Economic Literature (Sep-Tember 1983), 905–940.
Barney, J., & Clark, D. (2023). Resource-Based Theory: Creating and Sustaining Competitive Advantage. https://doi.org/10.1093/oso/9780199277681.001.0001
Brigham, E. F. ., & Daves, P. R. . (2007). Intermediate financial management. Thomson/South-Western.
Cano, C., Carrillat, F., & Jaramillo, F. (2004). A Meta-Analysis of the Relationship Between Market Orientation and Business Performance: Evidence From Five Continents. International Journal of Research in Marketing, 21, 179–200. https://doi.org/10.1016/j.ijresmar.2003.07.001
Chancharat, N., & Kumpamool, C. (2022). Working capital management, board structure and Tobin’s q ratio of Thai listed firms. Managerial Finance, ahead-of-print. https://doi.org/10.1108/MF-08-2021-0361
Chow, T., Huang, S., Klassen, K., & Ng, J. (2021). The Influence of Corporate Income Taxes on Investment Location: Evidence from Corporate Headquarters Relocations. Management Science, 68. https://doi.org/10.1287/mnsc.2020.3906
De Simone, L., Klassen, K. J., & Seidman, J. K. (2022). The effect of income-shifting aggressiveness on corporate investment. Journal of Accounting and Economics, 74(1), 101491. https://doi.org/https://doi.org/10.1016/j.jacceco.2022.101491
Durrah, O., Aziz, A., Rahman, A., Jamil, S. A., & Ghafeer, A. (2016). International Journal of Economics and Financial Issues Exploring the Relationship between Liquidity Ratios and Indicators of Financial Performance: An Analytical Study on Food Industrial Companies Listed in Amman Bursa. International Journal of Economics and Financial Issues |, 6(2), 435–441. http:www.econjournals.com
Frumusanu, N.-M., Breuer, A., & Lighezan Breuer, B. (2018). CASH AND LIQUIDITY/LIQUIDITY AND LIQUIDITY RATIO. http://conta.money.ro/dictionar_
Grinstein, A. (2008). The relationships between market orientation and alternative strategic orientations: A meta-analysis. European Journal of Marketing, 42(1–2), 115–134. https://doi.org/10.1108/03090560810840934
Hall, R. E., & Jorgenson, D. W. (1969). Tax policy and investment behavior: Reply and further results. The American Economic Review, 59(3), 388–401.
Ispriyarso, B., & Wibawa, K. C. S. (2023). Reconstruction of the national economy post-covid-19 pandemic: Critical study of tax reforms in Indonesia. Cogent Social Sciences, 9(1). https://doi.org/10.1080/23311886.2023.2174517
Karim, A., Widyarti, E. T., & Santoso, A. (2023). Effect of current ratio, total asset turnover, and size on profitability: Evidence from Indonesia manufacturing companies. Diponegoro International Journal of Business, 6(1), 57–63. https://doi.org/10.14710/dijb.6.1.2023.57-63
Lazăr, S., & Istrate, C. (2018). Corporate tax-mix and firm performance. A comprehensive assessment for romanian listed companies. Economic Research-Ekonomska Istrazivanja , 31(1), 1258–1272. https://doi.org/10.1080/1331677X.2018.1482225
Nuur, A. A., Komara, E. F., Jenderal, U., Yani, A., & Nuur, A. A. (2024). The Effect Of Current Ratio, Debt To Assets Ratio, Total Assets Turnover, And Company Size On Company Value (Tobin’s Q) In Coal Sub Sector Companies Listed On The Indonesia Stock Exchange Period. EKOMBIS REVIEW: Jurnal Ilmiah Ekonomi Dan Bisnis, 12(3), 12. https://doi.org/10.37676/ekombis.v12i3
Oz-Yalaman, G. (2019). The effects of corporate tax rate on the firm performance. In Handbook of Research on Strategic Fit and Design in Business Ecosystems (pp. 640–669). IGI Global. https://doi.org/10.4018/978-1-7998-1125-1.ch028
Poterba, J. M., & Summers, L. H. (1983). Dividend taxes, corporate investment, and ‘Q.’ Journal of Public Economics, 22(2), 135–167. https://doi.org/10.1016/0047-2727(83)90063-4
Ramadan, M. M., & Hassan, M. K. (2022). Board gender diversity, governance and Egyptian listed firms’ performance. Journal of Accounting in Emerging Economies, 12(2), 279–299. https://doi.org/10.1108/JAEE-02-2021-0057
Robinson, T. R., Hendry, E., Pirie, W. L., & Broihahn, M. A. (2015). INTERNATIONAL FINANCIAL STATEMENT ANALYSIS (3rd ed.). John Wiley & Sons, Inc.,.
Sameera, H. (2018). Do Resource Based View Spur Firm Performance? A Literature Review. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3280094
Sureth, C., & Langeleh, D. (2007). The Degree of Integrating Corporate and Capital Gains Tax into Income Tax and its Impact on Investment Decisions. Schmalenbach Business Review (Sbr), 59(4), 310–339. https://EconPapers.repec.org/RePEc:sbr:abstra:v:59:y:2007:i:4:p:310-339
Tobin, J. (1969). A general equilibrium approach to monetary theory. Journal of Money, Credit and Banking, 1(1), 15–29.
Wali, K. (2021). The detection of earnings management through a decrease of corporate income tax. Future Business Journal, 7(1). https://doi.org/10.1186/s43093-021-00083-8