Abstract
The main objective of this study is to provide further evidence on the determinants of firm’s profitability in Malaysia. A better understanding of this topic is important not only for the purpose of enriching empirical studies in this field but also for the purpose of sectoral and cross-country comparison. The use data from non-financial shariah compliant firms are the unique contribution of this paper. The data for the final sample consists of 169 firms and analyzed using the panel data analysis techniques to identify the key determinants of firm’s profitability. The study finds that the profitability of these firms significantly affected by the size of the firms, efficiency, and the level of sales. In addition, firms’ efficiency suggested to be the most important variable affecting firm’s performance. Although this paper provides empirical evidence, several areas need to be refined with future empirical research. First, this paper uses only limited number of variables, the inclusion of other firm specific variables might lead to a new set of findings and conclusion. Second, this paper has not taken into consideration the effect of using different data analysis technique. Future studies might want to explore the used of other techniques in analyzing the data.
Highlights
The main objective of this paper is to investigate factors affecting firm performance
Model and Data Measurement The main objective of this study is to investigate the determinants of profitability for shariah compliant companies listed under the trading and services sector
Result and Discussion Using the Return on Equity as the proxy for firm’s profitability, this paper investigates the determinants of profitability for all shariah compliant companies listed under the consumer products sector
Summary
The main objective of this paper is to investigate factors affecting firm performance. Literature provides us with different views on how firm performance should be measured, the main objective of evaluating firms’ performance remain the same, that is to investigate the financial stability and health of the firm. Financial performance of a firm is measured by looking at its profitability. This research is novel and original given the fact that not many research has been conducted on non-financial shariah compliant firms. This research argues that due to its unique characteristics (non-financial and shariah-compliant) the findings of other studies cannot be generalized to this study. We presented related works on the determinants of profitability. The analysis and results are presented along with the discussions.
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