The Impact of Political Stability, Profitability, and Liquidity on Financial Distress of Non-Bank State-owned Enterprises in Indonesia

Political stability in a country can have an impact on state-owned companies because state-owned companies are often used as cash cows by politicians, which can cause financial distress in state-owned companies. Financial difficulties or financial distress in companies can be influenced by internal and external factors. This study aims to analyze the effect of political stability, profitability and liquidity on financial distress in non-bank state-owned companies (SOE) in Indonesia. The dependent variable in this study is financial distress which is measured using the Altman Z Score. While the independent variable consists of external factors in the form of political stability and internal variables represented by profitability and liquidity, with sales growth and company age as control variables. The population in this study were non-bank state-owned companies listed on the Indonesia Stock Exchange. This study uses a quantitative approach with a causal associative research design. A total of 33 companies and a sample of 15 companies with an observation period of five years were taken. To test the hypothesis, panel data logistic regression was used. Data analysis was carried out with the help of Eviews 12 and SPSS software. The results of the study showed that there were two outcome variables in accordance with the hypothesis, namely political stability and liquidity had a significant negative effect on financial distress. While profitability did not have a significant effect on financial distress. For instance, political stability (SP) has a minimum value of -0.170 (2019) and a maximum of -0.004 (2023), with an average of -0.0846 and a standard deviation of 0.0551. Profitability (PF) shows a minimum value of -4.11 (WSBP 2020) and a maximum of 5.30 (INAF 2022), with an average of 0.079 and a standard deviation of 0.804. This finding confirms that high political stability and optimal liquidity reduce the risk of financial difficulties, while profitability is not a determinant of SOE financial distress.