Hisar Sirait, Sylvia Sari Rosalina, Abdulah Rakhman, Prima Apriwenni, Christian Wiradendi Wolor
This study aims to examine the influence of inflation rate on the financial performance of the agricultural sector by using the Structural Equation Modeling (SEM) using Smart PLS 4.0 software. The study examined the relationship between inflation and financial performance as measured through indicators such as profit margin and price-to-income ratio. The results of the study show that inflation has a significant negative effect on the financial performance of the agricultural sector. High inflation not only increases claims and operational costs, but also complicates the risk assessment process, impacting resource allocation and overall economic activity. In addition, the study emphasizes the importance of explicitly taking claims inflation into account in the calculation of loss reserves, especially for long-term liabilities that are vulnerable to price changes. Inflation and interest rates were also found to affect the price of production inputs, which in turn affected cost efficiency and corporate governance relationships. These findings make an important contribution to understanding the dynamics of the agricultural sector amid volatile inflationary conditions and provide policy implications that can help improve financial stability and efficiency in the sector. This research is expected to serve as a reference for policymakers and industry players in managing inflation risks effectively, as well as encouraging the development of strategies that are adaptive to macroeconomic changes. Thus, this study provides comprehensive insights into the impact of inflation on the financial performance of the agricultural sector and the importance of a structured analytical approach in the current economic context. © 2025 by the author(s).
Faculty of Economics and Business, Kwik Kian Gie School of Business, Jakarta, 11530, Indonesia; Faculty of Economics and Business, Universitas Negeri Jakarta, Jakarta, 13220, Indonesia
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