EFFECTS OF WORKING CAPITAL MANAGEMENT, SOLVENCY, AND PROFITABILITY ON BANKRUPTCY RISK (CASE: PROPERTY SECTOR IN INDONESIA STOCK EXCHANGE)

Abstract

Bankruptcy occurs when the company cannot pay off its debts, so it cannot continue its operations, including property sector companies in Indonesia. Bankruptcy can be caused by many factors, one of which is through companies such as working capital management. Bankruptcy also caused huge losses for shareholders, investors, creditors, employees, suppliers, and customers. To determine the effects of working capital management, solvency, and profitability on the risk of bankruptcy using three models, namely Altman, Springate, and Zmijewski and the analysis using the panel data regression method. This research focused on 50 companies in the property sector listed on the Indonesia Stock Exchange from 2015 to 2019. The result showed that only Debt to Assets Ratio as the indicator of solvency has a significant relationship with the Altman model’s risk of bankruptcy. In contrast, the Springate and Zmijewski models produce Average Age of Inventory and Average Payable Period as the working capital management indicator, Debt to Assets Ratio as the solvency indicator, and Return on Equity as the profitability indicator that have a significant relationship to bankruptcy risk.