The influence of capital structure on construction company profitability : a study of Malaysian Resources Corporation Berhad (MRCB) AND WCT Berhad / Malisa Ajis

With contribution of Modigliani and Miller in 1958, capital structure has attained an important place in finance field. The path breaking contribution has stimulated subsequent researchers to put emphasis on this topic. Therefore, other theories and researches have been revealed and many aspects have been included to capital structure studies so far. However, it
has always been controversial topic and the consensus has not been reached yet. Nevertheless, there are many important theories and hypotheses, which explain and investigate this topic very well such as agency cost theory, trade-off theory, pecking order theory, signalling theory, efficiency-risk hypothesis and franchise-value hypothesis.
When reviewed the literature and extended the understanding of these theories and hypotheses, the researcher found that the relationship between capital structure and firm performance is interesting aspect and worthwhile to research. Therefore, the researcher started an extensive literature review and found a research gap, which is the relationship between capital structure and company profitability in the Malaysian Resources Corporation Berhad (MRCB) and WCT Berhad during the period 2007-2012.
Accordingly, the study began with discussing the problem background. There also stated the research question, the objectives, and the expected contribution to clarify the scope of research. After that, the researcher will present the existing theories regarding capital structure and provide their interplay with firm performance.
After constituted research question and reviewed literature, the kind of data needed will be utilized. Therefore, the researcher started to search the best database provider for this study. As a result, the researcher decided on using the data collected from company financial report. The study sample included 6 year quaterly data of the company. After collect the data, it will be imported it to SPSS and ran regression and descriptive analysis.
According to the empirical findings and analysis, the researcher identify that there is a significant relationship between capital structure and company profitability of WCT Berhad while for MRCB was insignificant.
With this study, we provide further evidence about the interplay between capital structure and Company profitability and make a contribution both to theory regarding capital structure and Company profitability as well as giving practical insight for CFO’s and CEO’s of the company