Impact of Firm Leverage to Performance: Evidence from Shariah and Non-Shariah Compliant Companies in Malaysia

摘要

This study are meant to investigates the impact firm leverage towards the performance of Shariah compliant listed companies with the non-compliant Shariah listed companies and to discover on their firm leverage practices from each other. A total 70 construction companies listed in Securities Commission Malaysia (SC) main board belonging to construction sector for Shariah and non-Shariah compliant listed companies are analyzed covering the period from 2008 until 2012. Using pooled ordinary least square (POLS) method and generalized least square (GLS) with random and fixed effects, the results clearly indicated that firm leverage's choice between Shariah and non-Shariah compliant companies are totally difference. It shows that debt ratio does not give an impact towards Shariah compliant company's performance based on return in asset (ROA) and return on equity (ROE) but short-term debt and long-term debt does give an impact to Shariah compliant company's performance based on Marketto-book value (MTBV) with negative relationship. On the other hand, in Non-Shariah Compliance Company, inverse result shows when long-term debt and total debt does give an impact to Non-Shariah compliant company's performance based on ROE. While, size also represent a positive relationship toward Non-Shariah compliant company's performance.