The Effect Of Liquidity, Company Size, Profitability, Leverage And Type Of Industry On Disclosure Of Risk Management In Manufacturing Companies Listed On The Indonesia Stock Exchange In 2016-2018

The Effect of Financial Factors and Industry Types on Disclosure of Risk Management in Manufacturing Companies in Indonesia

Background

In today's era of globalization, risk management has become an essential element in the sustainability of a company. The disclosure of information about risk management by a company to the public can help investors and other stakeholders in assessing the company's ability to manage risk. This study aims to analyze the effect of liquidity, company size, profitability, leverage, and type of industry on disclosure of risk management in manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2016-2018 period.

Research Methods

This study uses multiple linear regression analysis with a sample of 99 manufacturing companies listed on the IDX. The data used is secondary data obtained from financial statements and company annual reports. The sampling method used is purposive sampling, and data processing is done using SPSS software.

Research Result

The results showed that liquidity, company size, profitability, and leverage partially had a positive and significant influence on disclosure of risk management. This shows that companies with high liquidity, large size, high profitability, and high leverage tend to be more open in uncovering information related to risk management. Meanwhile, the type of industry is found to have a negative and insignificant influence on disclosure of risk management. That is, the type of industry does not have a significant influence on the level of disclosure of company risk management.

Analysis and Discussion

1. Liquidity

The results showed that liquidity has a positive and significant influence on disclosure of risk management. Companies with high liquidity have better ability to fulfill their obligations and face financial risks. This encourages them to be more transparent in expressing information related to risk management in order to increase investor confidence and other stakeholders. High liquidity is essential for companies to manage risk effectively, and it is also a key factor in increasing transparency in risk management disclosure.

2. Company Size

The company's size also has a positive and significant influence on disclosure of risk management. Large companies tend to have a more complex organizational structure and a variety of risks. To minimize risks and maintain credibility in the eyes of the public, large companies are more likely to actively disclose information related to risk management. Company size is a critical factor in determining the level of risk management disclosure, as larger companies tend to have more complex risk profiles.

3. Profitability

High profitability shows good company performance and the ability to generate greater profits. Profitable companies tend to have more adequate resources to manage risk and have higher motivation to reveal information related to risk management. Profitability is a key indicator of a company's ability to manage risk effectively, and it is also a factor that influences the level of risk management disclosure.

4. Leverage

Leverage is the ratio of debt to one's own capital. Companies with high leverage have a higher level of financial risk. To minimize risk and increase investor confidence, companies with high leverage tend to be more open in expressing information related to risk management. High leverage can increase the level of risk management disclosure, as companies with high leverage tend to be more transparent in expressing information related to risk management.

5. Type of Industry

The results showed that the type of industry did not have a significant influence on disclosure of risk management. This shows that other factors such as liquidity, company size, profitability, and leverage have a stronger influence on disclosure of risk management compared to the type of industry. The type of industry is not a significant factor in determining the level of risk management disclosure, as other factors such as liquidity, company size, profitability, and leverage have a stronger influence.

Conclusion

This study shows that liquidity, company size, profitability, and leverage partially have a positive and significant influence on disclosure of risk management in manufacturing companies in Indonesia. Meanwhile, the type of industry does not have a significant influence on disclosure of risk management. These results provide an important picture for manufacturing companies in maximizing disclosure of risk management to build trust and increase company value in the eyes of investors and other stakeholders.

Suggestion

• Manufacturing companies in Indonesia need to pay attention to factors such as liquidity, company size, profitability, and leverage in an effort to increase disclosure of risk management.
• Regulators and related authorities need to encourage the application of good corporate governance principles (GCG) and more comprehensive accounting standards to improve the quality of risk management disclosure in manufacturing companies in Indonesia.
• Subsequent research can examine other factors that can influence disclosure of risk management such as regulatory factors, organizational culture, and competition levels in the industry.

Limitation

This study has several limitations. Firstly, the study only focuses on manufacturing companies listed on the IDX, and the results may not be generalizable to other industries. Secondly, the study uses secondary data obtained from financial statements and company annual reports, which may not provide a comprehensive picture of risk management disclosure. Finally, the study only examines the effect of liquidity, company size, profitability, leverage, and type of industry on disclosure of risk management, and other factors may also influence risk management disclosure.

Future Research

Future research can examine other factors that can influence disclosure of risk management such as regulatory factors, organizational culture, and competition levels in the industry. Additionally, future research can also examine the effect of risk management disclosure on company performance and investor confidence. By examining these factors, future research can provide a more comprehensive picture of risk management disclosure and its impact on company performance and investor confidence.
Frequently Asked Questions (FAQs) on the Effect of Financial Factors and Industry Types on Disclosure of Risk Management in Manufacturing Companies in Indonesia

Q: What is the significance of risk management in manufacturing companies?

A: Risk management is an essential element in the sustainability of a company, especially in the era of globalization which is full of uncertainty. Disclosure of information about risk management by the company to the public can help investors and other stakeholders in assessing the company's ability to manage risk.

Q: What are the factors that influence disclosure of risk management in manufacturing companies?

A: The study found that liquidity, company size, profitability, and leverage partially have a positive and significant influence on disclosure of risk management. Meanwhile, the type of industry is found to have a negative and insignificant influence on disclosure of risk management.

Q: What is the role of liquidity in disclosure of risk management?

A: Liquidity has a positive and significant influence on disclosure of risk management. Companies with high liquidity have better ability to fulfill their obligations and face financial risks. This encourages them to be more transparent in expressing information related to risk management in order to increase investor confidence and other stakeholders.

Q: How does company size influence disclosure of risk management?

A: Company size also has a positive and significant influence on disclosure of risk management. Large companies tend to have a more complex organizational structure and a variety of risks. To minimize risks and maintain credibility in the eyes of the public, large companies are more likely to actively disclose information related to risk management.

Q: What is the relationship between profitability and disclosure of risk management?

A: High profitability shows good company performance and the ability to generate greater profits. Profitable companies tend to have more adequate resources to manage risk and have higher motivation to reveal information related to risk management.

Q: How does leverage influence disclosure of risk management?

A: Leverage is the ratio of debt to one's own capital. Companies with high leverage have a higher level of financial risk. To minimize risk and increase investor confidence, companies with high leverage tend to be more open in expressing information related to risk management.

Q: What is the significance of the type of industry in disclosure of risk management?

A: The type of industry is found to have a negative and insignificant influence on disclosure of risk management. This shows that other factors such as liquidity, company size, profitability, and leverage have a stronger influence on disclosure of risk management compared to the type of industry.

Q: What are the implications of this study for manufacturing companies in Indonesia?

A: This study provides an important picture for manufacturing companies in maximizing disclosure of risk management to build trust and increase company value in the eyes of investors and other stakeholders. Manufacturing companies in Indonesia need to pay attention to factors such as liquidity, company size, profitability, and leverage in an effort to increase disclosure of risk management.

Q: What are the suggestions for regulators and related authorities?

A: Regulators and related authorities need to encourage the application of good corporate governance principles (GCG) and more comprehensive accounting standards to improve the quality of risk management disclosure in manufacturing companies in Indonesia.

Q: What are the limitations of this study?

A: This study has several limitations. Firstly, the study only focuses on manufacturing companies listed on the IDX, and the results may not be generalizable to other industries. Secondly, the study uses secondary data obtained from financial statements and company annual reports, which may not provide a comprehensive picture of risk management disclosure. Finally, the study only examines the effect of liquidity, company size, profitability, leverage, and type of industry on disclosure of risk management, and other factors may also influence risk management disclosure.

Q: What are the future research directions?

A: Future research can examine other factors that can influence disclosure of risk management such as regulatory factors, organizational culture, and competition levels in the industry. Additionally, future research can also examine the effect of risk management disclosure on company performance and investor confidence. By examining these factors, future research can provide a more comprehensive picture of risk management disclosure and its impact on company performance and investor confidence.