SJIF(2020): 5.702

International Journal of Advanced Research and Publications

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The Impact Of Capital Structure On Financial Performance Of Malaysian Public Listed Construction Firms

Volume 1 - Issue 3, September 2017 Edition
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Sharifa Hashim, Hafinaz Hasniyanti Hassan
capital structure, construction firm, financial performance, profitability
The topic of capital structure has been widely explored among the literature. Many studies have tried to identify the optimum capital structure that would allow profit maximization for companies. However, with capital structure, there have been many divergent findings due to different sectors exhibiting different behaviors and model that attempt to establish relationship between capital structure and performance. This research therefore, seeks to identify the impact of capital structure on profitability of 36 publicly listed construction firms in Malaysia in the year 2011- 2015. The objective of this study is to determine the impact and significance of capital structure on profitability, the relationship between DA with ROE, ROA and NPM and the relationship between DE with ROE, ROA and NPM. The researcher uses secondary data from audited financial statements of construction firms published in Bursa Malaysia Stock Exchange site. Quantitative methodology using random sampling was employed and the data collected were analyzed using excel and E-views 7 econometric software to come up with descriptive, regression and correlation results. The significance of data was measured using normality test and related, correlation, autocorrelation, multicollinearity and heteroscedasticity of the data was investigated to check the significance of the model. The findings revealed that capital structure impact’s financial performance of construction firms. whereby the impact was significant with DE and not significant with DA as per p-value of the coefficient of correlation. The findings also showed a negative relationship between DA and DE with ROE, ROA and NPM.
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