Financial Determinants of Return on Assets: Evidence from Indonesia’s Media and Entertainment Sector

Abstract

The media and entertainment sector in Indonesia is projected to grow at a compound annual growth rate of 8.4% over 2025–2029, yet the average Return on Assets (ROA) of listed firms in this sector declined from -8.62% in 2022 to -13.42% in 2023 before fluctuating through 2025, indicating unstable profitability. Prior studies on the determinants of ROA report inconsistent findings for Cash Ratio (CR), Debt to Asset Ratio (DAR), and Total Asset Turnover (TATO), and have mostly examined the food and beverage, retail, pharmaceutical, and automotive sectors, leaving the media and entertainment sector largely unexamined. This study aims to examine the partial and simultaneous influence of CR, DAR, and TATO on ROA in media and entertainment companies listed on the Indonesia Stock Exchange during 2022–2025. Using purposive sampling, 15 of 19 listed companies were selected, yielding 60 firm-year panel observations analyzed with panel data regression in EViews. The results show that DAR has a significant negative effect on ROA, while CR and TATO have no significant partial effect; however, the three variables jointly and significantly affect ROA, with an adjusted R-squared of 8.81%. The novelty of this study lies in providing the first sector-specific empirical evidence on these financial ratios for Indonesia's media and entertainment industry, showing that leverage, rather than liquidity or asset efficiency, is the dominant financial determinant of profitability in this sector.