DETERMINANTS OF PROFITABILITY AND DEA EFFICIENCY ANALYSIS OF INDONESIA’S CIGARETTE INDUSTRY
Abstract
Despite high smoking rates and large household spending on cigarettes, the cigarette
sales volume in Indonesia has gradually declined. Due to challenging years in the
cigarette industry, this research aims to analyze the determinants of profitability and
efficiency of cigarette companies in Indonesia from 2019 to 2023. The study uses data
from quarterly financial reports of four companies listed on the IDX. In panel data
regression analysis, the independent variables include the current ratio (CR), asset
turnover (TATO), and debt-to-equity ratio (DER), while the dependent variable is return
on assets (ROA). The selected model is the Fixed Effect Model (FEM). The findings reveal
that CR and DER significantly negatively influence return on assets, whereas TATO has
a significant positive influence on ROA. All the independent variables collectively have a
significant influence on the ROA of cigarette companies. Among these variables, DER
has the most significant influence on profitability. These variables explain 51.90% of the
variation in ROA. Separately, the average technical efficiency score of cigarette
companies in Indonesia from 2019 to 2023 is 69.0%. Simple regression analysis shows
that the average technical efficiency score is positive and significantly influences ROA.
This variable explains 47.68% of the variation in ROA. Overall, these variables in this
research explain 99.76% of the variation in ROA. In conclusion, cigarette companies
should prioritize using their assets effectively and carefully manage debt levels to attract
investors and maintain stable returns even during market fluctuations.
Keywords: Profitability, Efficiency, Cigarette Companies
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DOI: http://dx.doi.org/10.33021/icfbe.v0i0.5664
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