Impact of governance on profitability, liquidity and gearing of companies


Sundarasen, Sheela Devi D. and Rajangam, Nakiran and Rajagopalan, Usha (2014) Impact of governance on profitability, liquidity and gearing of companies. Asian Social Science, 10 (10). pp. 13-22. ISSN 1911-2025

[img] Text
Impact of governance on profitability, liquidity and gearing of companies.pdf
Restricted to Repository staff only

Download (203kB)


This study investigates the relationship between two governance issues, i.e., ownership and board structure of Malaysian listed firms (between 2010 and 2012) and their performance in terms of profitability, liquidity and gearing. Structural Equation Modeling is applied and the data analysis tool used is Maximum Likelihood Estimation (MLE). The dependent variables used as proxies for financial performance are; profitability, liquidity and gearing, whilst the independent variables are; ownership retention (OR), board size (BS), percentage of executive directors (ED), percentage of independent directors (ID) and percentage of non-independent non-executive directors (NINED). It is conjectured that there is consistency across all components of ownership and board structure in terms of its relationship with the gearing of companies. With the exception of non-independent non-executive directors, all other components of board structure in this study seem to have an impact on the gearing of companies. In that respect, it can be concluded that a company's ownership structure and board of directors who represent the shareholders have major concerns on the gearing of companies compared to other financial indicators, as the level of gearing of a company has important and long-lasting effects on the profitability and liquidity of companies. This study leads the path for further research on all aspects of a company's gearing.

Item Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28-70 Management. Industrial Management
Divisions: Faculty of Management (FOM)
Depositing User: Ms Suzilawati Abu Samah
Date Deposited: 23 Jun 2014 09:28
Last Modified: 23 Jun 2014 09:28


Downloads per month over past year

View ItemEdit (login required)