Strategic Liquidity Management and Financial Performance: The Mediating Roles of Business Risk and Board of Directors in Indonesian Consumer Firms
DOI:
https://doi.org/10.23960/E3J/v9.i1.94-104Keywords:
liquidity management, Financial Performance, Business Risk, Board of Directors, Indonesian Consumer FirmsAbstract
This study examines the relationship between strategic liquidity management and financial performance by incorporating business risk and the board of directors as mediating mechanisms in Indonesian consumer industry firms. Strategic liquidity management is proxied by the Current Ratio (CR), while financial performance is measured using Return on Investment (ROI). Business risk is represented by the Business Earnings Pressure Ratio (BEPR), and the board of directors acts as an intervening variable, with firm age included as a control factor to capture organizational maturity. Using balanced panel data from nine listed firms during 2018–2024, the study evaluates both direct and indirect relationships among the variables. The results indicate that strategic liquidity management positively affects financial performance. Indirect evidence shows that business risk improves operational stability and the board of directors strengthens governance effectiveness, which together enhance firm outcomes. These findings suggest that effective liquidity management, controlled business risk, and active involvement of the board of directors support sustainable financial performance. By integrating these variables within a single mediation framework in an emerging market context, this study provides a novel and comprehensive explanation of how internal financial conditions influence firm performance and contributes practical insights to the corporate finance and governance literature.
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