Purpose – The purpose of this paper is to identify the performing and non‐performing companies by using multiple discriminant analysis (MDA) and multiple regression and the ratios that could distinguish between the performing and the under‐performing companies. Design/methodology/approach – First, the study applied the α Jensen technique to classify the Shariah compliance companies into performing and non‐performing. Then, the results from the α Jensen technique with 20 financial ratios are applied to MDA in order to establish models that are used to identify non‐performing and performing companies. Findings – The growth turnover ratio is the only ratio that could discriminate between the performing and non‐performing companies in the plantation industry. Research limitations/implications – The paper only investigates a sector in the main board of Bursa Malaysia, which is the plantation industry. Future research may look into the whole Shariah counters in Bursa Malaysia. Practical implications – The paper could assist investors to evaluate and select an optimal investment portfolio. Originality/value – The paper applies multivariate analysis which does not depend only on one variable. Using the multivariate analysis it provides an alternative to establish models that discriminate between the performing and non‐performing companies. This paper also investigates only the Shariah compliance counters in Bursa Malaysia.
International Journal of Islamic and Middle Eastern Finance and Management – Emerald Publishing
Published: Jun 20, 2008
Keywords: Statistical methods of analysis; Multivariate analysis; Company performance; Malaysia; Capital markets; Benefit‐cost ratio