THE IMPACT OF MACROECONOMIC FACTORS ON FIRMS’ FINANCIAL PERFORMANCE IN MALAYSIA
DOI:
https://doi.org/10.35631/AIJBES.829077Keywords:
GDP Growth, Inflation, Interest Rate, Macroeconomic Factors, Malaysia, Random Effects Model, Return on AssetsAbstract
This study examines the effects of inflation, interest rates, and gross domestic product (GDP) growth on the financial performance of large listed firms in Malaysia from 2015 to 2024. Secondary data were obtained from the audited annual reports of the top 50 large Bursa Malaysia-listed companies selected based on market capitalisation and macroeconomic data from DataStream. Financial performance was measured using return on assets (ROA), while inflation was proxied by the Consumer Price Index and interest rates by the Overnight Policy Rate. Using a panel dataset of 500 firm-year observations, the study employed descriptive statistics, correlation analysis, and a random-effects regression model with robust standard errors. The results indicate that inflation and interest rates have no statistically significant relationship with ROA during the study period. GDP growth shows a positive but marginally significant relationship with ROA, providing limited evidence that economic expansion may be associated with improved firm profitability. Firm size and leverage, included as control variables, have significant negative relationships with ROA. The findings suggest that firm-specific financial characteristics may be more closely associated with the performance of large Malaysian firms than the selected macroeconomic variables. The study extends prior Malaysian evidence by examining large Bursa Malaysia-listed firms across industries over a ten-year period, using ROA and incorporating both macroeconomic and firm-specific factors. The findings may also assist managers, policymakers, and investors in evaluating the factors associated with firm profitability.
Downloads
References
Alifiah, M. N., & Tahir, M. S. (2018). Predicting financial distress companies in the manufacturing and non-manufacturing sectors in Malaysia using macroeconomic variables. Management Science Letters, 8(6), 593-604.
Bank Negara Malaysia. (2020). Annual report 2020. Bank Negara Malaysia.
Bashir, R., Ahmad, M., & Sherif, S. R. (2024). Determining the nexus between Dynamic Working Capital Management and Operational Efficiency in Emerging Southeast Asia. Journal of Finance & Banking Review (JFBR), 9(2).
Beck, T., Demirguc‐Kunt, A. S. L. I., Laeven, L., & Levine, R. (2008). Finance, firm size, and growth. Journal of money, credit and banking, 40(7), 1379-1405.
Bernanke, B. S., & Gertler, M. (1995). Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives, 9(4), 27–48.
Bernanke, B. S., Gertler, M., & Gilchrist, S. (1999). The financial accelerator in a quantitative business cycle framework. Handbook of macroeconomics, 1, 1341-1393.
Chang, A. A. L., & Shazali, A. M. (2005). Can good corporate governance practices contribute to firms' financial performance? – evidence from Malaysian companies. International journal of business governance and ethics, 1(4), 350–362.
Department of Statistics Malaysia. (2021). Malaysia economic performance fourth quarter 2020. Department of Statistics Malaysia.
Department of Statistics Malaysia. (2023). Gross domestic product 2022. Department of Statistics Malaysia.
George, S. S., & Md Yusof, S. K. B. (2023). The impact of inflation rate on Malaysian stock market performance during crisis years. International Journal of Multidisciplinary Research and Publications, 6(1), 131–135.
Gertler, M., & Gilchrist, S. (1994). Monetary policy, business cycles, and the behavior of small manufacturing firms. The quarterly journal of economics, 109(2), 309-340.
Izwan, I. D. M., Azman, N. B., Zakaria, N. B., & Ghapar, F. A. (2024). Confluence 0f board members' financial literacy, corporate environmental disclosure, and financial reporting quality. Journal of Law and Sustainable Development, 12(1), e2220.
Liu, J. (2004). Macroeconomic determinants of corporate failures: evidence from the UK. Applied economics, 36(9), 939–945.
Nissim, D., & Penman, S. H. (2003). Financial statement analysis of leverage and how it informs about profitability and price-to-book ratios. Review of Accounting Studies, 8, 531–560.
Platt, H. D., & Platt, M. B. (1994). Corporate financial distress: a study of the airline industry. Journal of air transport management, 1(2), 117–121.
Roslan, N. H., Saddam, S. Z., Ahmad, M., & Amran, M. H. B. (2024). Examining the influence of macroeconomic factors and corporate governance on firm performance in the ace market. Information management and business review, 16(1), 153–162.
Shaharudin, B. J., Tinggi, M., Hui, T. K., Johari, A., & Myint, K. T. (2019). Analysis of corporate governance and firm performance: evidence from Malaysian listed companies. International journal of business and social science, 10(1), 118–133.
Tirapat, S., & Nittayagasetwat, A. (1999). An investigation of Thai listed firms’ financial distress using macro and micro variables. Multinational finance journal, 3(2), 103–125.
Wadhwani, S. B. (1986). Inflation, bankruptcy, default premia and the stock market. The economic journal, 96(381), 120–138.
Zeitun, R., Tian, G. G., & Keen, S. (2007). Macroeconomic determinants of corporate performance and failure: evidence from an emerging market – the case of jordan. Corporate ownership & control, 5(1), 179–194.
