The impact of governance and financial factors on predicting financial distress: evidence from Indonesian family retail firms

As the largest economy in Southeast Asia, Indonesia is strongly driven by family-owned enterprises, particularly in the retail sector. This study aims to investigate the governance and financial aspects of publicly listed Indonesian family retail firms to identify strategies for mitigating financial distress during potential future crises. This study examined how various governance factors—specifically managerial ownership, gender diversity, and board size—and key financial ratios, including profitability, liquidity, sales growth, debt-to-equity ratio, and debt-to-assets ratio, affect financial distress in family retail businesses listed on the Indonesia Stock Exchange during the 2019–2022 period. Using panel data regression analysis with Eviews 12 software, we found that the debt-to-assets ratio increased the likelihood of financial distress significantly. In contrast, other variables, including gender diversity, board size, debt-to-equity ratio, and asset turnover, did not exhibit a significant effect on financial distress; however, gender diversity exacerbated it. This discovery raises important questions regarding governance and operational frameworks within family-owned firms. Additionally, our moderated regression analysis revealed that firm size significantly influenced the relationship between gender diversity and financial distress, underscoring its role as a crucial factor for board diversity. These findings contribute to a deeper understanding of financial distress determinants, particularly within family retail firms, which can contribute to managerial practices and policy frameworks.