Business Administration and Business Economics

SOH WEI NI · ANNUAR MD NASSIR · CHENG FAN FAH ·International Journal of Economics and Management ·2018 ·JEL: M42; M41

A corporate cash holding is significant element in the cash and liquidity management. Corporations with higher excessive cash reserves will benefit when high liquidity makes it easier for managers to transfer funds among several of the corporations’ expenses and debts, and allows for more flexibility in managing daily operational activities. However, it raise some issue as firm with higher cash holdings tend to explore to higher agency cost due to the conflict of interest between ownership and management. This study employs data envelopment analysis (DEA) estimation and two-stage regressions model. The findings conclude that the firm size, firm growth, and gross domestic product (GDP) are statistically significant for firm efficiency in both markets. The cash holdings help improve firm efficiency as the adjusted R-square is significantly increased for all models. However, the cash holdings are not related to the efficiency of high-cash holding firms for these two stock exchanges. The contribution of cash holdings to firm efficiency is higher, and even double for a developed market compared with a developing market (Bursa Malaysia), which shows that the development stage of a country impacts on cash holdings’ contribution to firm efficiency.

Ali Saleh Alarussi · Sami Mohammed Alhaderi ·Managerial Auditing Journal ·2018

Purpose The purpose of this paper is to examine the factors affecting profitability in Malaysian-listed companies. It has been argued that profitability is the main pillar for any company to survive in the long run. Although profitability is the primary goal of all business ventures, scant attention has been paid to the factors that affect profitability in developing countries. This study investigates the factors affecting profitability in Malaysian-listed companies. Design/methodology/approach This research is based on five independent variables that were empirically examined for their relationship with profitability. These variables are: firm size (as measured by total sales), working capital (WC), company efficiency (assets turnover ratio), liquidity (current ratio) and leverage (debt equity ratio and leverage ratio). Data of 120 companies listed on Bursa Malaysia covering the period from 2012 to 2014 were extracted from companies’ annual reports. Pooled ordinary least squares regression and fixed-effects were used to analyze the data. Findings The findings show a strong positive relationship between firm size (total sales), WC, company efficiency (assets turnover ratio) and profitability. The results also show a negative relationship between both debt equity ratio and leverage ratio and profitability. Liquidity (current ratio) has no significant relationship with profitability. Research limitations/implications Due to the time limitation, the data includes only 120 companies listed in bursa Malaysia and covers the period from 2012 to 2014. Practical implications These results benefit internal users (such as mangers, shareholders and employees). They can realize the determinants of enhancing the profitability of their company after the depreciation of the Malaysian currency and therefore concentrate more on the factors that enhance their companies’ profitability. On the other side, other external users (such as investors, creditors, new established companies, tax authority) also may get advantages of these results. It is clear that those users concern about the profitability of companies and the determinants of their profitability after the currency’s depreciation. Originality/value This study differs than previous studies in many ways: first, it focuses on non-financial listed companies in Malaysia. Previous studies have concentrated on companies in the financial sector, such as banking and financial institutions or on industrial organizations. Second, this study analyzes the data in companies’ annual reports for a three-year period from 2012 to 2014. During this period, the economy in Malaysia was fluctuating due to currency depreciation. Third, the study used both return on equity and earnings per share as indicators of profitability. Fourth, the results of the study provide empirical evidence that large size firms with efficiently managed assets can improve operating income and ultimately enhance profitability. Last but not least, this study applies the resource-based theory and the trade-off theory.