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All Journal Proceeding ISETH (International Summit on Science, Technology, and Humanity)
Raihan Irfan Abdul Majid
Universitas Muhammadiyah Surakarta
Computer Science & IT Engineering Medicine & Pharmacology Social Sciences Other

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Corporate Financial Distress Risk: Influence of Business Strategy and Environmental Responsibility Raihan Irfan Abdul Majid; Banu Witono
Proceeding ISETH (International Summit on Science, Technology, and Humanity) 2025: Proceeding ISETH (International Summit on Science, Technology, and Humanity)
Publisher : Universitas Muhammadiyah Surakarta

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Abstract

Purpose: This study examines the impact of Cost Leadership, Differentiation, Environmental Performance, and Environmental Costs on Financial Distress in Energy and Basic Materials sectors listed on Indonesia Stock Exchange during 2021-2024. These sectors face unique challenges combining Economic Volatility with Substantial Environmental Responsibilities.Methodology: By using Purposive Sampling, 172 firm-year observations from 43 companies were analyzed through Multiple Linear Regression with the Grover Model, which demonstrates superior accuracy compared to traditional Financial Distress prediction models.Results: Results reveal that Cost Leadership (β=0.584, p<0.001) and Differentiation (β=3.748, p<0.001) significantly increase G-Score, which reduce Financial Distress risk, with Differentiation exhibiting dominant influence. Conversely, Environmental Performance (β=0.008, p=0.849) and Environmental Costs (β=-0.088, p=0.834) demonstrate statistically insignificant effects on short-term financial health. The model collectively explains 60.8% of Financial Distress variance (Adjusted R²=0.608).Applications/Originality/Value: This research provides original contribution by integrating Business Strategy and Environmental Responsibility variables, addressing critical gaps in existing literature that predominantly examines these factors separately in Indonesian emerging market context.
Co-Authors Banu Witono