Optimizing Financial Performance through Leverage, Liquidity, and Size of Indonesian Chemical Manufacturing Companies

Abstract

This study analyzes the effect of liquidity and firm size on financial performance with leverage as a mediating variable in chemical sub-sector manufacturing companies listed on the Indonesia Stock Exchange during 2019–2024, a period that covers the COVID-19 pandemic and the subsequent economic normalization. The study employs a quantitative approach using secondary data from annual financial statements. Seventeen companies were selected through purposive sampling, resulting in 102 observations (17 companies × 6 years), of which 92 observations were used in the final statistical analysis. Data were analyzed using multiple linear regression and mediation testing through the PROCESS Macro in IBM SPSS Statistics, preceded by classical assumption tests. Grounded in agency theory, the results indicate that liquidity has a significant effect on both financial performance at the 10% level (H1) and leverage (H4), while firm size has a significant effect on financial performance (H2) but no significant effect on leverage (H5). Leverage has a significant effect on financial performance (H3). Leverage significantly mediates the relationship between liquidity and financial performance (H6) but does not mediate the relationship between firm size and financial performance (H7). These findings confirm that monitoring managerial decisions on current asset accumulation and debt utilization is essential to reduce agency costs and improve corporate financial performance.