Financial performance and profit growth: Examining the moderating role of leverage
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Published:
Sep 29, 2026
Keywords:
Debt-to-Equity Ratio, Financial Performance, Food and Beverage, Profit Growth, Profitability
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Articles
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Abstract
This study examines whether leverage moderates the relationship between financial performance and profit growth among food and beverage firms listed on the Indonesia Stock Exchange during 2021–2025. Using purposive sampling, 34 firms were retained from an initial population of 64, producing 170 firm-year observations. The study applies panel-data regression and moderated regression analysis in EViews 13. Model-selection tests support the common effect specification. The results show that NPM is positively associated with profit growth, ROA is negatively associated with profit growth, and ROE is statistically insignificant. In the interaction specification reported in the underlying analysis, NPM×DER and ROE×DER are positive and significant, whereas ROA×DER is negative and significant. These findings indicate that financing structure is relevant when interpreting profitability signals, although the baseline model explains only a modest share of profit-growth variation. The novelty of this study lies in examining DER not merely as a direct financial determinant, but as a moderating factor that alters the relationship between NPM, ROA, and ROE and profit growth in Indonesian food and beverage firms using recent 2021–2025 panel data. The findings should be interpreted cautiously because extreme observations may affect coefficient stability, while the interaction-only moderation specification limits inference about DER’s moderating role. Future research should use robust outlier treatment and fully specified moderation models including both main and interaction effects.
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How to Cite
Sitanggang, T., Andika, W. T., Sitanggang, J. M. V., & Sitanggang, C. Y. (2026). Financial performance and profit growth: Examining the moderating role of leverage. Indonesia Auditing Research Journal, 15(3), 399–407. https://doi.org/10.35335/arj.v15i3.802
References
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Priyono, A. A., Saraswati, E., & Widarko, A. (2024). Assessing the Impact of Financial Performance Metrics on Profit Growth: Evidence from LQ45 Companies Listed on the Indonesia Stock Exchange. Fokus Bisnis Media Pengkajian Manajemen Dan Akuntansi, 23(2), 271–286. https://doi.org/10.32639/27d34a77
Ridho, M. S., & Rahmadhani, S. (2026). Integrating digital business strategies and accounting information systems to enhance profit growth: Evidence from culinary MSMEs. Indonesia Auditing Research Journal, 15(2), 115–125. https://doi.org/10.35335/arj.v15i2.643
Shoaib, A., & Siddiqui, M. A. (2022). Earnings management and theoretical adjustment in capital structure performance pattern: Evidence from APTA economies. Borsa Istanbul Review, 22(1), 20–36.
Siti Meisaroh, Tatas Ridho Nugroho, Nurdiana Fitri Isnaini, & Imam Baidlowi. (2023). Pengaruh NPM, ROA, ROE Terhadap Pertumbuhan Laba Dengan Bopo Sebagai Moderasi. Jurnal Mutiara Ilmu Akuntansi, 1(4), 84–95. https://doi.org/10.55606/jumia.v1i4.1990
Tian, X. , W. Y., & Kohar, U. H. A. (2024). ). Capital structure, business model innovation, and firm performance: Evidence from Chinese listed corporate based on system GMM model. PLOS ONE, 19(6).
Wang, Y. Z., & Ahmad, S. (2024). Green process innovation, green product innovation, leverage, and corporate financial performance: Evidence from system GMM. Heliyon, 10(4).
Wasan, P., Mulchandani, K., & Mulchandani, K. (2022). Do changes in deferred revenue indicate future financial performance? Evidence from India. Journal of International Accounting, Auditing and Taxation, 46.
Alhaddad, L. M., Whittington, M., & Gerged, A. M. (2022). Abnormal real activities, meeting earnings targets and firms’ future operating performance: evidence from an emerging economy. Journal of Accounting in Emerging Economies, 12(2), 213–237. https://doi.org/10.1108/JAEE-07-2020-0161
Aydoğmuş, M., Gülay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22, S119–S127. https://doi.org/10.1016/j.bir.2022.11.006
Bawono, I. R., & Handika, R. (2023). How do accounting records affect corporate financial performance? Empirical evidence from the Indonesian public listed companies. Heliyon, 9(4), e14950. https://doi.org/10.1016/j.heliyon.2023.e14950
Bui, H., & Krajcsák, Z. (2024). The impacts of corporate governance on firms’ performance: from theories and approaches to empirical findings. Journal of Financial Regulation and Compliance, 32(1), 18–46. https://doi.org/10.1108/JFRC-01-2023-0012
Chakradhar, J., & Gupta, R. (2024). Heterogeneous effect of economic policy uncertainty and firm financial performance: Empirical evidence from India. Managerial and Decision Economics, 45(7), 4930–4951. https://doi.org/10.1002/mde.4308
Cuevas-Vargas, H., Cortés-Palacios, H. A., & Lozano-García, J. J. (2022). Impact of capital structure and innovation on firm performance. Direct and indirect effects of capital structure. Procedia Computer Science, 199, 1082–1089. https://doi.org/10.1016/j.procs.2022.01.137
Huynh, Q. L., Hoque, M. E., Susanto, P., Watto, W. A., & Ashraf, M. (2022). Does Financial Leverage Mediates Corporate Governance and Firm Performance? Sustainability, 14(20), 13545. https://doi.org/10.3390/su142013545
Jabbouri, I., Satt, H., El Azzouzi, O., & Naili, M. (2024). Working capital management and firm performance nexus in emerging markets: do financial constraints matter? Journal of Economic and Administrative Sciences, 40(5), 1020–1030. https://doi.org/10.1108/JEAS-01-2022-0010
Jape, S., & Malhotra, M. (2023). A study of DuPont model: its application and identification of key determinants for public limited companies. International Journal of Business and Globalisation, 35(1/2), 173–202. https://doi.org/10.1504/IJBG.2023.134396
Kalash, I. (2023). The financial leverage–financial performance relationship in the emerging market of Turkey: the role of financial distress risk and currency crisis. EuroMed Journal of Business, 18(1), 1–20. https://doi.org/10.1108/EMJB-04-2021-0056
Ketaren, A., Sembiring, J. C., & Chania, M. F. (2025). The influence of return on assets (ROA) and capital adequacy ratio (CAR) on profit growth in the banking sector listed on the Indonesia Stock Exchange for the period 2021–2023. Management Studies and Entrepreneurship Journal, 6(4).
Khan, S., Akhtar, T., & Qasem, A. (2024). Dynamics of capital structure determinants: empirical evidence from GCC countries. Future Business Journal, 10(1), 107. https://doi.org/10.1186/s43093-024-00394-6
Kijkasiwat, P., Hussain, A., & Mumtaz, A. (2022). Corporate Governance, Firm Performance and Financial Leverage across Developed and Emerging Economies. Risks, 10(10), 185. https://doi.org/10.3390/risks10100185
M N, N., Shenoy, S. S., Chakraborty, S., & B M, L. (2024). Does the Ind AS moderate the relationship between capital structure and firm performance? Journal of Corporate Accounting & Finance, 35(2), 86–102. https://doi.org/10.1002/jcaf.22673
M. N., N., Shenoy, S. S., Chakraborty, S., & B. M., L. (2024). Is the nexus between capital structure and firm performance asymmetric? An emerging market perspective. Cogent Economics & Finance, 12(1). https://doi.org/10.1080/23322039.2023.2296195
Mahmood, A. N., Arslan, H. M., Younas, Z. I., Komal, B., Ali, K., & Mubeen, M. (2023). Understanding the dynamics of capital structure, corporate governance, and corporate social responsibility in high- and low-leveraged US and Chinese firms. Environmental Science and Pollution Research, 30(16), 46204–46221. https://doi.org/10.1007/s11356-022-24843-3
Nikmah, C., & Hung, R.-J. (2024). The impact of ASEAN economic community, firm characteristics and macroeconomics on firm performance and firm value: An investigation of Shariah-compliant firms in Indonesia. Heliyon, 10(11), e32740. https://doi.org/10.1016/j.heliyon.2024.e32740
Priyono, A. A., Saraswati, E., & Widarko, A. (2024). Assessing the Impact of Financial Performance Metrics on Profit Growth: Evidence from LQ45 Companies Listed on the Indonesia Stock Exchange. Fokus Bisnis Media Pengkajian Manajemen Dan Akuntansi, 23(2), 271–286. https://doi.org/10.32639/27d34a77
Ridho, M. S., & Rahmadhani, S. (2026). Integrating digital business strategies and accounting information systems to enhance profit growth: Evidence from culinary MSMEs. Indonesia Auditing Research Journal, 15(2), 115–125. https://doi.org/10.35335/arj.v15i2.643
Shoaib, A., & Siddiqui, M. A. (2022). Earnings management and theoretical adjustment in capital structure performance pattern: Evidence from APTA economies. Borsa Istanbul Review, 22(1), 20–36.
Siti Meisaroh, Tatas Ridho Nugroho, Nurdiana Fitri Isnaini, & Imam Baidlowi. (2023). Pengaruh NPM, ROA, ROE Terhadap Pertumbuhan Laba Dengan Bopo Sebagai Moderasi. Jurnal Mutiara Ilmu Akuntansi, 1(4), 84–95. https://doi.org/10.55606/jumia.v1i4.1990
Tian, X. , W. Y., & Kohar, U. H. A. (2024). ). Capital structure, business model innovation, and firm performance: Evidence from Chinese listed corporate based on system GMM model. PLOS ONE, 19(6).
Wang, Y. Z., & Ahmad, S. (2024). Green process innovation, green product innovation, leverage, and corporate financial performance: Evidence from system GMM. Heliyon, 10(4).
Wasan, P., Mulchandani, K., & Mulchandani, K. (2022). Do changes in deferred revenue indicate future financial performance? Evidence from India. Journal of International Accounting, Auditing and Taxation, 46.
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