CLUSTERING ANALYSIS OF LEVERAGE IN INDONESIAN MANUFACTURING COMPANIES: A STUDY ON RISK AND FINANCIAL STABILITY

Abstract

This study analyzes leverage strategies among Indonesian manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2020 to 2022. Using K-Means clustering, the research identifies three distinct groups based on leverage levels: low leverage, moderate leverage, and high leverage. Companies in the low leverage cluster prioritize financial  stability  and  minimize  debt  exposure,  offering  resilience  during  economic  downturns.  The  moderate leverage cluster balances debt with equity to support growth while managing financial risk. In contrast, the high leverage cluster consists of firms that aggressively utilize debt, aiming for high returns but facing significant financial risk, especially during market volatility. The study’s findings highlight the diverse approaches to leverage within the manufacturing sector, emphasizing the importance of aligning leverage strategies with a firm’s risk tolerance and growth objectives. The results provide valuable insights for corporate managers aiming to optimize capital structures, investors seeking to assess financial risk, and policymakers interested in promoting financial stability in critical economic sectors. This research contributes to the understanding of leverage management, particularly in emerging markets, and offers a framework for future studies on corporate finance strategies in times of economic uncertainty.