Leverage and financial performance of palm oil firms : a comparative analysis between Malaysia and Indonesia / Nurulyasirah Mohd Fakhruddin

This study aims to investigate the relationship between Leverage and Financial
Performance of Palm Oil Firms between Malaysia and Indonesia. This study used
panel data from 24 palm oil firms in Malaysia that listed in the main board of Bursa
Malaysia and 11 palm oil firms in Indonesia that listed in the Indonesia stock
exchange. The timeframe for data collection is from 2013 to 201 7. The dependent
variable in this study financial performance proxy by return on equity (ROE)
meanwhile the independent variables in the study is capital structure proxy by shortterm
debt (STD), long-term debt (LTD) and total debt (TD). The findings on
Malaysian palm oil firms indicates that STD and TD have negative relationship with
ROE, whereby LTD have a significant negative relationship with ROE. Meanwhile,
the findings on Indonesian Palm oil firms reveal that STD and TD have a significant
negative relationship with ROE, whereby LTD have a negative relationship with
ROE. The findings of the study suggest that the financing pattern of Palm oil firms in
Malaysia and Indonesia are in line with pecking order theory. Profitable firm prefer to
finance its operation and investment opportunity using retained earning.