EFFECT OF LEVERAGE, INTERNAL FACTORS AND EXTERNAL FACTORS ON FINANCIAL RISK AND FINANCIAL PERFORMANCE COMPANY

Abstract

The research objective was to verify and analyze: (1) effect of leverage, internal factors and external factors towards financial risk Local Water Company (LCW) at Papua Province and West Papua Province; (2) effect of leverage, internal factors and external factors towards financial performance Local Water Company (LCW) at Papua Province and West Papua Province; (3) effect of financial risk towards financial performance Local Water Company (LCW) at Papua Province and West Papua Province.

This study took the data of financial statements from Local Water Company (LCW) which in at Papua Province and West Papua Province. In the reporting period December 31, 2011, December 31, 2012, December 31, 2013 and December 31, 2014 (time series). The analysis tool used is SEM (Structural Equation Medelling) using methods PLS (Partial Least Square), the use of this method due to data used for further processing in small quantities that is data for 4 years (2011 – 2014) with the number some Local Water Company (LCW) which in at Papua Province and West Papua Province.

The results of this study can be generalized that leverage and internal factors affect towards financial risk, therefore Hipotesis 1 (H₁) and Hipotesis 2 (H₂) can be accepted as true. While external factors not affect towards financial risk, therefore Hipotesis 3 (H₃) cannot be accepted as true. Leverage, internal factors and external factors affect significant towards financial performance, therefore Hipotesis 4 (H₄), Hipotesis 5 (H₅) and Hipotesis 6 (H₆) can be accepted as true. Financial risk affect significant towards financial performance, therefore Hipotesis 7 (H₇) can be accepted as true. Financial risk can act as partial meatation, between leverage and internal factors with financial performance, while financial risk cannot act as partial meatation, between external factors with financial performance.