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Performance of Shariah compliance companies in the plantation industry

Performance of Shariah compliance companies in the plantation industry 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Islamic and Middle Eastern Finance and Management Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8394
DOI
10.1108/17538390810881008
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

International Journal of Islamic and Middle Eastern Finance and ManagementEmerald Publishing

Published: Jun 20, 2008

Keywords: Statistical methods of analysis; Multivariate analysis; Company performance; Malaysia; Capital markets; Benefit‐cost ratio

References