The Effect of Inflation, Interest Rates, Exchange Rates, Net Profit Margin, Total Assets Turnover, and Current Ratio on Stock Prices through Financial Distress as a Mediation Variable (Empirical Study on Textile and Garment Companies Listed on the Indonesia Stock Exchange for the 2021–2024 Period)

Abstract

The textile and garment industry in Indonesia faced significant economic pressure due to macroeconomic fluctuations and deteriorating financial performance during the 2021–2024 period, as reflected in declining stock prices among most issuers and increasing risks of financial distress in several companies. This study aimed to examine the effects of inflation, interest rates, exchange rates, Net Profit Margin (NPM), Total Asset Turnover (TATO), and Current Ratio (CR) on financial distress and stock prices, as well as the mediating role of financial distress in textile and garment companies listed on the Indonesia Stock Exchange (IDX). This study employed a quantitative method with descriptive and verificative approaches using secondary data analyzed through panel data regression with the Random Effect Model (REM) for 15 companies during the 2021–2024 period. The findings showed that the Current Ratio had a significant effect on both financial distress and stock prices, while inflation had a significant effect only on stock prices. Meanwhile, interest rates, exchange rates, Net Profit Margin, Total Asset Turnover, and financial distress did not have significant effects on stock prices. Furthermore, financial distress did not mediate the relationship between macroeconomic variables, financial ratios, and stock prices. These findings indicated that corporate liquidity was the most consistent factor influencing both financial condition and market valuation. Therefore, the results provided valuable insights for investors in making investment decisions and for corporate management in maintaining liquidity to strengthen market confidence.