The effect of supply chain finance on firm performance in Indonesia’s coal production sub-industry

Abstract

The coal industry in Indonesia is a capital-intensive sector characterized by long operating cycles and high dependence on global commodity price fluctuations. These conditions create substantial liquidity needs, making efficient working capital management crucial. This study aims to examine the effect of Supply Chain Finance (SCF) on firm performance in Indonesia’s coal production sub-industry. SCF in this study is measured using the Cash Conversion Cycle (CCC) and its components, Days Sales Outstanding (DSO), Days Inventory Outstanding (DIO), and Days Payable Outstanding (DPO). Firm performance is proxied by Return on Assets (ROA), while the control variables include firm size (SIZE), leverage (LEV), and sales growth (SALEG). The main hypothesis proposes that SCF has a positive effect on firm performance. This research employs secondary data from 19 coal production companies listed on the Indonesia Stock Exchange (IDX) during the 2020-2024 period. The analysis is conducted using panel data regression with the Random Effect Model (REM) approach, estimated through the Generalized Least Square (XTGLS) method.The results show that SCF has no significant effect on firm performance, while leverage (LEV) and sales growth (SALEG) have a negative and significant effect. The coefficient of determination (R²) of 27.06% indicates that the model explains 27.06% of the variation in firm performance. These findings suggest that SCF efficiency in the coal industry does not directly enhance profitability, likely due to the long cash conversion cycle and high capital requirements inherent in this sector.

Keywords: {'name': 'Supply Chain Finance'}, {'name': 'Firm Performance'}, {'name': 'Cash Conversion Cycle'}, {'name': 'Coal'}

Authors & affiliations

Novita Ratna Satiti
University of Muhammadiyah Malang

Aishwayra Rayhana Wakid
Universitas Muhammadiyah Malang

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