Capital Structure Dynamics Under Industrial Distress: The Impact of Short-Term and Long-Term Debt on Textile Firms Profitability

Erric Wijaya; Nurdin Nur Abdi

doi:10.55927/eajmr.v5i10.11

Authors

Erric Wijaya STIE Indonesia Banking School
Nurdin Nur Abdi STIE Indonesia Banking School

DOI:

https://doi.org/10.55927/eajmr.v5i10.11

Keywords:

Capital Structure, Short-Term Debt, Long-Term Debt, Firm Profitability

Abstract

This study aims to examine the effect of Short Term Debt (STDA) and Long Term Debt (LTDA) on the financial performance of textile and garment subsector companies listed on the Indonesia Stock Exchange during the 2023Q1–2025Q3 period. Using panel data regression, the research analyses 18 companies selected through purposive sampling, resulting in 198 observations. Control variables include Tangibility (TG), Sales Growth (SG), dan Firm Size (FS). Financial performance is measured by Return on Assets (ROA) and Net Profit Margin (NPM). The findings indicate that Short Term Debt has a significant negative effect on both ROA and NPM, suggesting elevated liquidity risk due to heavy reliance on short-term financing. Long Term Debt also negatively affects ROA and NPM, implying that excessive long-term leverage without corresponding operational improvement reduces profitability. These results highlight the importance of maintaining a balanced and adaptive capital structure to sustain financial performance in a volatile industry environment.

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