Abstract
Manufacturing is the largest contributor to Indonesia's gross domestic product, yet the average return on assets of listed manufacturers declined from 0.0667 in 2021 to 0.0335 in 2024. The research gap addressed here is that prior studies test the direct effects of asset structure and financing decisions on profitability without explaining the internal mechanism through which those effects travel. This study examines whether operational efficiency mediates the effects of capital intensity, liquidity, and leverage on profitability. The sample consists of 45 manufacturing firms listed on the Indonesia Stock Exchange during 2020 to 2024, producing 222 firm-year observations. Panel regression was estimated in EViews 13 and the mediation test was run in Stata 15 using a cluster bootstrap with 5,000 replications. Model selection used the Chow, Hausman, Lagrange Multiplier, and Mundlak tests, and inference relied on cluster-robust standard errors. Capital intensity lowers operational efficiency, operational efficiency raises profitability, and operational efficiency fully mediates the effect of capital intensity on profitability. Liquidity and leverage affect neither variable. The novelty of this study is evidence that asset turnover is the single channel linking asset structure to profitability, while financing decisions do not determine profitability during crisis and recovery