Working environmental quality and financial distress: evidence from Indonesia

Figures & data

Table 1. Sample selection and data distribution.

Panel A. Sample selection
Description		Number of observations
Total listed company from IDX for 2019–2021		2,592
(-) Financial Industry (SIC-6)		(1,063)
(-) Missing data		(426)
Total sample observation		1,103
Panel B. Sample distribution based on SIC
SIC	Frequency	Percent	Cumulative
0 (Agriculture, Forestry, and Fishing)	43	3.90%	3.90%
1 (Mining)	157	14.23%	18.13%
2 (Construction)	310	28.11%	46.24%
3 (Manufacturing)	190	17.23%	63.46%
4 (Transportation, Communication, and Utilities)	146	13.24%	76.70%
5 (Wholesale and Retail Trade)	114	10.34%	87.04%
7 (Service Industries)	111	10.06%	97.10%
8 (Health, Legal & Educational services, and Consulting)	32	2.90%	100%
Total	1,103	100%	100%

Table 2. Descriptive analysis.

	Mean	Minimum	P25	Median	P75	Maximum
DISTRESS	0.711	0.000	0.000	1.000	1.000	1.000
WORKQUALITY	0.855	0.636	0.818	0.818	0.909	1.000
BIG4	0.302	0.000	0.000	0.000	1.000	1.000
BOARDSIZE	2.027	1.386	1.792	1.946	2.303	2.890
INDCOM	0.413	0.167	0.333	0.400	0.500	0.750
FIRMSIZE	28.368	24.428	27.154	28.240	29.586	32.355
ROA	0.047	−0.354	−0.002	0.044	0.095	0.478
PPE	27.003	19.868	25.807	27.123	28.521	31.460
LEV	1.385	−6.553	0.338	0.738	1.534	21.741
CATA	0.434	0.028	0.236	0.416	0.620	0.960
CURRENT	2.776	0.036	0.909	1.489	2.701	48.115
RECT	0.120	0.000	0.034	0.092	0.173	0.498

Table 3. Correlation matrix.

	DISTRESS	WORKQUALITY	BIG4	BOARDSIZE	INDCOM
DISTRESS	1.000
WORKQUALITY	−0.058**	1.000
	(0.048)
BIG4	−0.101***	0.072**	1.000
	(0.000)	(0.013)
BOARDSIZE	−0.130***	0.204***	0.253***	1.000
	(0.000)	(0.000)	(0.000)
INDCOM	0.029	0.011	−0.029	−0.146***	1.000
	(0.311)	(0.705)	(0.322)	(0.000)
FIRMSIZE	−0.052*	0.246***	0.284***	0.648***	−0.010
	(0.076)	(0.000)	(0.000)	(0.000)	(0.731)
ROA	−0.472***	0.058**	0.116***	0.160***	0.066**
	(0.000)	(0.045)	(0.000)	(0.000)	(0.024)
PPE	0.038	0.184***	0.264***	0.562***	−0.038
	(0.195)	(0.000)	(0.000)	(0.000)	(0.195)
LEV	0.101***	0.068**	0.018	0.052*	0.003
	(0.001)	(0.020)	(0.544)	(0.073)	(0.911)
CATA	−0.481***	0.004	−0.029	−0.036	0.002
	(0.000)	(0.900)	(0.321)	(0.221)	(0.938)
CURRENT	−0.097***	−0.038	−0.057*	−0.150***	−0.022
	(0.001)	(0.187)	(0.050)	(0.000)	(0.443)
RECT	−0.349***	0.018	−0.023	−0.032	−0.021
	(0.000)	(0.535)	(0.425)	(0.264)	(0.467)

Table

	FIRMSIZE	ROA	PPE	LEV	CATA	CURRENT	RECT
FIRMSIZE	1.000
ROA	0.185***	1.000
	(0.000)
PPE	0.849***	0.138***	1.000
	(0.000)	(0.000)
LEV	0.145***	−0.052*	0.119***	1.000
	(0.000)	(0.076)	(0.000)
CATA	−0.196***	0.190***	−0.406***	−0.039	1.000
	(0.000)	(0.000)	(0.000)	(0.180)
CURRENT	−0.191***	−0.017	−0.274***	−0.114***	0.225***	1.000
	(0.000)	(0.561)	(0.000)	(0.000)	(0.000)
RECT	−0.215***	0.163***	−0.262***	−0.044	0.556***	−0.029	1.000
	(0.000)	(0.000)	(0.000)	(0.130)	(0.000)	(0.315)

p-values in parentheses.

* p < 0.1, **p < 0.05, ***p < 0.01.

Table 4. Main regression quality of working environment on financial distress.

	(1)
	DISTRESS
WORKQUALITY	−1.091*
	(–1.767)
BIG4	−0.292***
	(–2.681)
BOARDSIZE	−0.398**
	(–2.139)
INDCOM	0.328
	(0.664)
FIRMSIZE	0.099
	(1.128)
ROE	−1.346***
	(–6.147)
PPE	−0.160**
	(–2.107)
CATA	−4.227***
	(–10.191)
RECT	−1.820***
	(–3.037)
INVREC	0.407
	(0.956)
_cons	5.892***
	(5.366)
Year FE	Yes
Industry FE	Yes
r2_p	0.378
N	1103

t statistics in parentheses.

* p < 0.1, **p < 0.05, ***p < 0.01.

Table 5. Coarsened Exact Matching (CEM) analysis.

	WORKING QUALITY = 0	WORKING QUALITY = 1
All	210	974
Matched	200	682
Unmatched	10	292
	(1)
	DISTRESS
WORKQUALITY	−2.345*
	(–1.765)
BIG4	−0.333
	(–1.267)
BOARDSIZE	−0.704*
	(–1.666)
INDCOM	1.212
	(0.906)
FIRMSIZE	0.049
	(0.264)
ROA	−16.809***
	(–5.445)
PPE	−0.215
	(–1.198)
LEV	0.130
	(1.253)
CATA	−7.362***
	(–7.890)
CURRENT	−0.058***
	(–2.808)
RECT	−1.681
	(–1.067)
_cons	12.839***
	(4.767)
Year FE	Yes
Industry FE	Yes
r2_P	0.513
N	882

t statistics in parentheses.

* p < 0.1, ** p < 0.05, *** p < 0.01.

Table 6. Heckman two-stage regression.

	First Stage	Second Stage
	D_WORKQUALITY	DISTRESS
MEAN_QUAL	37.406***
	(14.198)
WORKQUALITY		−1.192*
		(–1.864)
BIG4	−0.280	0.189*
	(–1.014)	(1.876)
BOARDSIZE	1.063**	−0.452***
	(2.458)	(–2.799)
INDCOM	0.858	−0.239
	(0.865)	(–0.532)
FIRMSIZE	0.030	0.175***
	(0.209)	(3.225)
ROE	−0.035	−0.598***
	(–1.080)	(–4.336)
PPE	0.027	−0.056
	(0.272)	(–1.351)
CATA	1.875**	−1.346***
	(2.493)	(–3.975)
RECT	1.733	1.876***
	(1.129)	(2.842)
INVREC	−1.369	0.620
	(–1.242)	(1.280)
MILLS		−0.035
		(–0.581)
_cons	−33.100***	−2.486**
	(–10.241)	(–2.328)
Year FE	Yes	Yes
Industry FE	Yes	Yes
r2_p	0.465	0.502
N	1103	1103

t statistics in parentheses.

* p < 0.1, **p < 0.05, ***p < 0.01.

Table 7. Additional analysis: quality of working environment on financial distress using another proxy of financial distress.

	(1)	(2)
	DISTRESS2	DISTRESS3
WORKQUALITY	−0.997*	−0.998**
	(–1.857)	(–2.169)
BIG4	0.187*	−0.006
	(1.864)	(–0.071)
BOARDSIZE	−0.449***	−0.445***
	(–2.782)	(–3.191)
INDCOM	−0.240	0.191
	(–0.533)	(0.544)
FIRMSIZE	0.174***	0.173***
	(3.212)	(3.379)
ROE	−0.602***	−2.442***
	(–4.355)	(–24.988)
PPE	−0.054	0.094**
	(–1.313)	(2.277)
CATA	−1.329***	−1.250***
	(–3.910)	(–4.788)
RECT	1.882***	2.059***
	(2.853)	(4.072)
INVREC	0.602	1.546***
	(1.242)	(4.236)
_cons	−2.695***	−7.725***
	(–2.679)	(–9.568)
Year FE	Yes	Yes
Industry FE	Yes	Yes
r2_p	0.090	0.205
N	1103	1103

t statistics in parentheses.

* p < 0.1, ** p < 0.05, *** p < 0.01.

Variable definition

	Definition	Sources
Dependent variable
DISTRESS	Dummy 1 if Z-Score < 1.8, 0 otherwise	Osiris
Independent variable
WORKQUALITY	Quality of Working Environment Index, By measure the average value of the total disclosure quality index, which consists of Generous Fringe Benefits; Management Departures; Bonus Plan for Employees/Managers; Diversity Opportunity Policy/Diversity and Opportunity; Diversity Opportunity Policy/Work Life Balance; Diversity and Opportunity Processes/Diversity and Opportunity Policy; Diversity and Opportunity Processes/Work Life Balance; Flexible Working Schemes; Training and Career Development Policy/Skills Training; Training and Career Development Policy/Career Development; and Management Training divided by the total quality index that should be disclosed.	Annual report
Control variable
BIG4	Dummy 1 if the company is audited by BIG4 auditor, 0 otherwise	Annual report
BOARDSIZE	Natural logarithm of the total value of commissioner and director	Annual report
INDCOM	Independent commissioner divided by total commisioner	Annual report
FIRMSIZE	Natural Logarithm of total assets	Osiris
ROE	Return on Equity, Net profit divided by total equity	Osiris
PPE	Natural Logarithm value of Plant Property and Equipment	Osiris
CATA	Total current assets divided by total assets	Osiris
RECT	Total account receivables divided by total assets	Osiris
INVREC	Total inventory plus receivables divided by total assets	Osiris