Adoption of particular capital investment appraisal techniques for advanced manufacturing technologies: Malaysian manufacturing firms

The industry plays an important role in the economic growth of a country and for Malaysia the expansion of this sector continues to provide the main stimulus to the growth of the economy. however, growth cannot solely be based on traditional means of production. in order for a country to gain a competitive advantage, investment in new and high technology has become mandatory. Malaysia has moved towards capital-intensive and high technology industries in the 1990s. the Malaysian government needs to encourage the development of high-technology industries so that they can produce better products more efficiently due to the emergence of cheaper production bases in other countries, such as thailand, indonesia and China. in order for Malaysian industries to survive, Malaysia has to sustain its competitiveness by having a higher productivity and efficiency level.. Emphasis has been given to technology development and implementation in the Seventh Malaysian Plan. Various measures were implemented by the Malaysian Government to consolidate and strengthen the competitiveness of the manufacturing sector. among the initiatives undertaken were enhancing productivity and quality systems, along with utilising advanced technologies. these initiatives were supported by promotional activities and information diffusion undertaken by the national Productivity Corporation (nPC) and SiriM Berhad to educate enterprises on the latest techniques in productivity and quality improvements (Malaysia, 2001). the eight Malaysian Plan has also stressed the development of competitive advantage and productivity to enable the manufacturing sector to advance further. Firms are expected to intensify efforts in technology upgrading and developing indigenous technological capabilities in an environment of increasingly competitive markets and an accelerating pace of scientific and technological change (Malaysia, 2001). Recent concerns have been expressed that many firms are failing to invest in advanced manufacturing technology as fully as they should (hayes and Garvin, 1982; Primrose, 1991). a major reason for under-investment in new manufacturing technologies centres on the limitations of financial appraisal techniques (aggarwal, 1991; Cheung and Mason, 1993; drury and tayles, 1997; ashford et. al., 1998). Lefley (1996a; 1996b) suggested that these traditional approaches used in selecting investment failed to capture the full benefits from advanced manufacturing technology projects. These benefits are often intangible and traditional approaches are particularly incapable of capturing the value of options. Boquist et. al. (1998) stated that firms have lost millions of dollars through incorrect investment decisions, most probably as firms have been using the discounted cash flow (DCF) techniques to evaluate high technology investments based on the same criteria of acceptance as traditional capital budgeting (Wilner et. al., 1992)

Capital structure, capital investment and profitability among Malaysian listed firms

Capital investments are referred as a critical managerial decision on firm's fixed asset for generating profitability. However, the empirical finding shows that not every capital investment has a significant positive effect on profitability. Literature indicates mixed results of examining the capital investment relationship with firm's profitability, which vary in respects to the debt structure. On the other hand, strong government reinforcement has pushed Malaysia up as one of the top ten countries with robust private capital investment in the year 2004. Since the capital investments are typically irreversible and hypothesized as profit generator, the first aim of this study is to examine the effect of the capital investment on the firm's profitability across firms and sectors. The second aim is to examine the moderating effect of capital structure on the relationship between capital investment and profitability across firms and sectors. This study utilized pooled ordinary least squares and fixed effect analysis across 708 non-financial Malaysian listed firms. The unbalanced datasets for the period 2001 to 2015 were employed to check the robustness of these results. This study suggested that capital investment has a strong significant positive effect on profitability measurements across Malaysian listed firms in non-financial sectors. On the other hand, the significant negative moderating effect of capital structure on the relationship between capital investment and return on capital across Malaysian listed firms reflected the perspective of empire building theory. In addition, the independent sample test engaged across sectors affirmed that moderating effect of capital structure are different across sectors. Thus, this study concluded the existence of moderating effect of capital structure on the relationship between capital investment and profitability. This study addressed the knowledge gap on the moderating effect of capital structure based on empire building theory

Corporate Default Prediction with Industry Effects : Evidence from Emerging Markets

The accurate prediction of corporate bankruptcy for the firms in different industries is of a great concern to investors and creditors. Firm-specific data accompany with industry and macroeconomic factors offer a potentially large number of candidate predictors of corporate default. We employ a predictor selection procedure based on non-parametric regression and classification tree method (CART) and test its performance within a standard logistic regression model. Overall entire analyses indicate that the orientation between firm-level determinants and the probability of default is affected by each industry’s characteristics. As well, our selection method represents an efficient way of introducing non-linear effects of predictor variables on the default probability

Sectoral analysis on capital structure determinants among the Malaysian listed firms

This study highlights the sensitivity of capital structure determinants in each sector within the ensembles of Malaysia Listed Companies. Based on pooled OLS, fixed effect and Generalized Method of Moments analysis, the findings revealed that capital structure determinants vary across sectors due to its nature or characteristics

Sectoral analysis on capital structure determinants among the Malaysia listed firms

This study highlights the sensitivity of capital structure determinants in each sector within the ensembles of Malaysia Listed Companies. Based on pooled OLS, fixed effect and Generalized Method of Moments analysis, the findings revealed that capital structure determinants vary across sectors due to its nature or characteristics

An Interaction between Firm Strategy, Capital Structure and Firm’s Performance

The study tries to determine the association among corporate strategy, social structure and firm performance. In this regard, the monetary reports of 78 companies listed in Karachi Stock Exchange since 2007 to 2014 were scrutinized. In this research, firm strategy (sales growth, liquidity) and capital structure (debt ratio) were used as sovereign variables, and firm performance (return on equity, return on assets, free cash flow for the firm, free cash flow per share) were functional and are used as dependent variables, so to study the affiliation between corporate strategy, capital structure and firm performance within a 8-years period from 2007 to 2014. Secondary data has been used to test the hypotheses; single variable linear regression method was used and their significance was evaluated using Statistics T (t-test) and F (Fisher). The study results indicate that there is a significant positive relationship between sales growth variables and two types (among four types) of performance criteria in the study, namely return on equity and return on assets. And there is a positive significant relationship between firm liquidity and three criteria of firm's performance in the study namely return on equity, free cash flow per share and return on assets. Also, debt ratio has a positive significant relationship with free cash flow for firm and a negative significant relationship with return on assets

Evaluating the exchange rate and commodity price nexus in Malaysia: evidence from the threshold cointegration approach

This paper examines the long- and short-run dynamics of asymmetric adjustment between the nominal exchange rate and commodity prices, namely oil, palm oil, rubber, and natural gas prices, in Malaysia using monthly data from January 1994 to December 2017. The relationship between exchange rate and each commodity price is examined in terms of Engle-Granger and threshold cointegrations. The estimated results provide evidence of long-run threshold cointegration and show that the adjustments towards the long-run equilibrium position are asymmetric in the short run. Furthermore, this study finds evidence of a unidirectional causal relationship running from the nominal exchange rate to oil price in the long and short run using a spectral frequency domain causality application. There is also empirical evidence of bidirectional causality between the nominal exchange rate and palm oil price, rubber price, and natural gas price in the long and short run. Overall, the findings have significant implications for the current debate on the future of primary commodities in Malaysia

The impact of credit policy on firm performance among Malaysian manufacturers

Credit policy is a set of temporary payment terms agreed between seller and buyer, in a form of credit. Credit expedites some of the complicated process organization experienced. Normally, the process required high level approval in order to complete procure activities or business transaction. In Malaysia, the credit policy has become one of the sales tools to secure more business, and identify new business opportunities. However, it is unsure to what extent the credit policy helps on firm performance. Thus, the aim of this study is to investigate the relation, the factors and the influence. The research tested on Malaysian manufacturers. A total of 35 survey questionnaires were received from Malaysian manufacturers and the data has been analysed using Statistical Package for Social Science (SPSS) software. Three out of four dimensional factors were rejected; credit structure, receivables management and inventory control. Only one of the factors was accepted and has significant impact on firm performance which is payables management. The results of the study revealed 41% of firm performance were depending on credit policy. This study fills the gap in the literature of credit policy conducted in Malaysia

Review of corporate governance practices and financial distress prediction

Good corporate governance practices play an import role in increasing the firm value. Based on the agency theory related to corporate governance, if an agent (management) does not protect interest of principal (shareholders) then, agency cost is occurred and this creates a bad impact on the corporate performance. Therefore, it is necessary to address weak corporate governance practices in early stages otherwise firms can go in financial distress and eventually become bankrupt. The objective of this current study is to conduct a nonsystematic review of literature on theories and models related to corporate governance and financial distress. In the light of thorough review of literature, it is found that corporate governance variables (i.e. ownership concentration, board size, board composition, CEO duality, level of independence of board from management and managerial ownership) are good predictors for predicting financial distress. Moreover, it is also found that these corporate governance variables were not only used separately for predicting financial distress but also used along with others variables (firm level and country level) for the purpose of enhancing quality of financial distress models