CAPITAL STRUCTURE AND LIQUIDITY ON FINANCIAL PERFORMANCE: THE MODERATING ROLE OF GOOD CORPORATE GOVERNANCE

Abstract

The phenomenon of fluctuating financial performance in companies listed in the LQ45 index in Indonesia remains a concern, as indicated by changes in Net Profit Margin (NPM). This condition is influenced by internal factors such as capital structure, liquidity, and the implementation of good corporate governance that has not yet been optimal. This study aims to analyze the effect of capital structure and liquidity on financial performance with good corporate governance as a moderating variable. The data used are secondary data obtained from financial statements and annual reports of 20 LQ45 index companies during the 2022–2024 period. The analysis was conducted using panel data regression with the Random Effect Model (REM) through EViews 12. The results of this study indicate that capital structure and liquidity have a significant effect on financial performance. In addition, good corporate governance is able to moderate the effect of capital structure and liquidity on financial performance. The implications of this study emphasize the importance of optimal capital structure and liquidity management, as well as strengthening corporate governance to support the improvement of financial performance. This study is expected to serve as a consideration for company management and investors in making more effective and sustainable decisions.