There
are various reasons why a company suffers a bad debt in its account. The
reasons may vary across types of companies.
This study focuses on the bad debts or arrears of local state owned water supplies (PDAM). Economic crisis may not be
the sole factor affecting the financial problems of the companies. However, the crisis itself has given
strong impact on the capacity to generate cash and, hence, the capacity to
repay their obligation. In the case of Indonesia, it is found that some
variables representing the capacity
to repay strongly influence the companies to repay arrears. This study attempts
to explore whether the capacity to
repay of the firms are related to the arrears. It seems that this study is
still in line with other studies saying that the main reason of the
arrears is the unwillingness to repay.