THE MODERATING ROLE OF LEVERAGE ON CORPORATE BONDS YIELD

Abstract

This study aims to identify the effect of bond credit rating, firm size, profitability, and
liquidity on the yield to maturity (YTM) of listed Indonesian corporate bonds, with
leverage ratio as a moderating variable. A panel data multi-linear regression with the fixed
effect estimator was used to investigate the YTM of 25 listed corporate bonds from 2019 to
2021. The sample data comprise complete financial reports published in the Indonesia Stock
Exchange (IDX) market and operations in the non-financial sector to increase the accuracy
of information obtained. The results show that profitability proxied to return-on-asset
(ROA) and firm size positively affect the YTM, while the liquidity ratio proxied to the
current ratio (CR) had a negative influence. As a moderating variable, leverage proxied to
the debt-to-equity ratio (DER) positively moderates the effect of CR, DER negatively
moderates the effect of ROA and DER cannot moderate the bond’s credit rating to influence
the YTM. However, the bond’s credit rating does not affect the YTM. The analysis of
corporate bonds is a relatively uncommon study in Indonesia, and significant implicating
for policymakers, underscoring the importance of meticulous management of CR and DER,
which can decrease the YTM.