The Role of Firm Size in Moderating The Influence of Financial Ratios and Good Corporate Governance on Financial Distress in Manufacturing Companies for The Period 2019-2023

The manufacturing sector, a cornerstone of Indonesia’s economy, faces increasing vulnerability to financial distress due to global shocks such as the COVID-19 pandemic and trade disruptions. This study investigates the influence of financial ratios—specifically liquidity and profitability—and corporate governance (institutional ownership and board independence) on financial distress in manufacturing firms, while examining the moderating role of firm size. A quantitative method employing panel data regression was applied to 205 manufacturing companies listed on the Indonesia Stock Exchange over the period 2019–2023. The Altman Z-Score served as the financial distress indicator. Results reveal that profitability significantly reduces financial distress, whereas liquidity becomes significant only when moderated by firm size. In contrast, institutional ownership and board independence do not exhibit significant effects. Notably, firm size demonstrates a dual role—both as a direct influence on financial distress and as a moderator, enhancing or diminishing the effect of financial indicators. These findings contribute to financial management literature by highlighting that firm-specific characteristics such as size alter the effectiveness of financial health indicators. The implications suggest that management and investors should consider both scale and financial performance in distress prediction models. Future studies are recommended to include qualitative dimensions of governance and assess industry-specific or macroeconomic moderating variables.