Determinants of Financial Performance in Coal Energy Companies: The Role of Audit Quality, Profitability, and Sales Growth

Abstract

Research aim : This study aims to examine and analyze the determinants of financial performance in coal energy companies listed on the Indonesia Stock Exchange (IDX). Specifically, it investigates the empirical effects of audit quality, profitability, and sales growth on financial performance, proxied by Gross Profit Margin (GPM).

Design/Methode/Approach : A quantitative research design using an associative and descriptive approach was implemented in this study. The population comprises energy sector companies listed on the IDX, with a purposive sampling technique applied to select the final sample of coal mining firms for the observation period. Secondary data were gathered from verified financial reports and annual reports. Data analysis was conducted using Multiple Linear Regression analysis, supplemented by classical assumption tests (normality, multicollinearity, heteroscedasticity, and autocorrelation tests) and statistical hypothesis testing (t-test, F-test, and coefficient of determination R²) to ensure model robustness.

Research Finding : Audit quality (proxied by Big Four vs. Non-Big Four auditors) exhibits a positive and significant effect on financial performance, indicating that superior external oversight enhances financial presentation credibility and operational discipline Profitability shows a positive and statistically significant relationship with financial performance, demonstrating that a firm's internal capacity to generate returns directly strengthens its overall gross profit margins. Sales growth exerts a significant positive impact on financial performance, confirming that market expansion and increasing demand volumes efficiently translate into enhanced financial outcomes for coal energy firms. Simultaneously, audit quality, profitability, and sales growth significantly influence the financial performance of coal energy companies, explaining a substantial portion of the variance in Gross Profit Margin.

Theoretical contribution/Originality : This study enriches the literature on agency theory and signaling theory within the extractiv industry context by demonstrating how rigorous external auditing and robust operational metrics jointly signal corporate health and mitigate information asymmetry. The novelty of this research lies in its specific integration of both governance factors (audit quality) and core marketing financial metrics (sales growth and profitability) as synchronous determinants of financial performance within the highly volatile and strictly regulated coal energy sector of an emerging market.

Practitionel/Policy implication : For corporate managers in coal mining enterprises, the findings highlight the critical importance of maintaining robust sales trajectories and upgrading audit partnerships to hightier firms to boost investor confidence and financial performance. This study provides empirical insights for capital market regulators (such as the OJK and IDX) to continually encourage stringent external audit compliance and transparent financial disclosures among high externality energy sector firms.

Research limitation : This study primarily evaluates financial performance through Gross Profit Margin (GPM) using a limited set of independent variables (audit quality, profitability, and sales growth), potentially omitting other critical determinants such as commodity price volatility, leverage, or ESG risk factors. The empirical focus is strictly confined to publicly traded coal energy companies in Indonesia, which may constrain the direct generalizability of the findings to unlisted mining entities or alternative energy industries operating under different regulatory frameworks.