PPD1041PPD1041,SEM 1,22/23

The Expected Outcome Document

TABLE OF CONTENTS
CHAPTER 3 METHODOLOGY……………………………………......................1

3.0 Introduction……………………………………………………………………...1

3.1 Data Description…………………………………………………………………1

3.1.1 Secondary Data……………………………………………………………...1

3.1.2 Population…………………………………………………………………...2

3.1.3 Sample……………………………………………………………………….2

3.2 Conceptual Framework…………………………………………………………..3

3.3 Hypothesis………………………………………………………………………..4

3.4 Variables of Study………………………………………………………………..4

3.3.1 Dependent Variable…………………………………………………………..4

CHAPTER 4 RESULTS AND DISCUSSION……………………………………...5

4.0 Introduction………………………………………………………………………5

4.1 Multicollinearity Test………………………………………………………….6

4.2 Descriptive Statistics…………………………………………………………..7

LIST OF TABLES
Table 3 Multicollinearity test (Shariah compliant Firms)…………………………..6

Table 4 Multicollinearity test ( Non- Shariah compliant Firms)……………………6

Table 5 Descriptive Statistics ( Shariah compliant Firms)………………………….7

LIST OF FIGURE

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Figure 2 Relation between dependent variable, independent variable and controlled

Variable………………………………………………………………………………3

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CHAPTER 3 METHODOLOGY

3.0 Introduction

In this chapter, the research design, conceptual framework and the description of the

dependent, independent and controlled variables will be explained. The data

description on how does the data are collected to be used in this study will also be

explained in this chapter. Besides that, this chapter also consist the description of the

statistical analysis that tested in this study. The statistical analysis that involve in this

study is Pearson Correlation Coefficient analysis, Multicollinearity test, panel data

analysis, Breusch and Pagan Lagrangian Multiplier and Hausman test. In addition, the

method of analysis that is Stata 11 will be explained through this chapter.

3.1 Data Description

3.1.1 Secondary Data

To examine the impact of working capital management on profitability of Shariah

compliant and non-Shariah compliant of trading and services sector in Malaysia, the

secondary data were obtained. The secondary data that used in this study was obtained

from DataStream database. Besides that, the financial data of the firm that were used

to derive the variable that used as dependent variable, independent variables and

controlled variables were obtained from official web page of Bursa Malaysia.

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3.1.2 Population

The target population in this study is all the stock listed under trading and services

sector in Bursa Malaysia for the year of 2011 until 2015. All of the stock listed under

trading and services sector can give the real situation of how does the trading and

services goes in the industry on Malaysia.

3.1.3 Sample

In order to determine the impact of working capital management on profitability of

Shariah-compliant and non-Shariah compliant on trading and services firms listed in

Malaysia, the study used choose hundreds firms in trading and services sector

randomly from Bursa Malaysia where the firms selected was equally distributed with

fifty Shariah-compliant firms and another fifty of non-Shariah compliant firms. The

study period ranged from 2011 to 2015. Thus, the panel data sets of 500 observations

were obtained for the analysis.

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3.2 Conceptual Framework

Figure 1: Relation between dependent variable, independent variable, controlled

variable

The figure above shows how the dependent variable that is return on assets affected by

the independent variable; average receivable period, inventory turnover period,

average payment period, and current ratio by controlling for debt ratio as well as firm

size.

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3.3 Hypothesis

In line with the objectives of this study, the hypothesis was formed as below:

H1 : There is a significant relationship between ARP with ROA

H2 : There is a significant relationship between ITP with ROA

H3 : There is a significant relationship between APP with ROA

H4 : There is a significant relationship between CR with ROA

H5 : There is a significant relationship between DR with ROA

H6 : There is a significant relationship between FS with ROA

3.3 Variables of Study

3.3.1 Independent Variable

3.3.1.1 Return on Assets (ROA)

Return on assets were used as an indicator toasure the profitability that used in this

study. Return on assets can give better understand on the efficiency of firm’s

management on using their assets to generates earnings (Padachi, 2006). Return on

assets will be examined in this study to see how it reacts towards the components of

working capital management. Enqvist, Graham and Nikkinen (2014) set the return on

assets as a dependent variable to measure the profitability on their study of the impact

of working capital management on firm profitability in different business cycle on

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Finland. The higher the return on assets, the better the management on firm’s working

capital. The return on assets calculated as follows

CHAPTER 4 RESULTS AND DISCUSSION

4.0 Introduction

The objective of this research is to study the impact of working capital management

on profitability of Shariah compliant and non-Shariah compliant of trading and

services firms listed in Bursa Malaysia for the year of 2010 to 2015. Return on asset

(ROA) was used as the indicator of the profitability of the firm which act as dependent

variable and the independent variables was represent by the account receivable period

(ARP), inventory turnover period (ITP), account payable period (APP), current ratio

(CR), debt ratio (DR), firm size (FS), and sales growth (SG).

This chapter included the running test that is carried out by using Stata Data Analysis

that is the Multicollinearity test, descriptive statistic, Pearson Correlation Coefficient,

panel data analysis which consist of pooled OLS, fixed effect and random effect.

Breusch and Pagan Multiplier test and Hausman test are used to determine the most

appropriate model.

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4.1 Multicollinearity Test

Diagnostic checking is carried out to identify whether there is any multicollinearity

existed where the independent variables is not significant to dependent variable and all

the independent variables are highly interrelated to one another.

Table 1: Multicollinearity test ( Shariah Compliant Firms)

Mean VIF 1.23

Based on Table 3, the mean for VIF (Variance Inflation Factor) is 1.23, which is less

than 10. This indicates that there is no multicollinearity problem existed.

Table 2 : Multicollinearity test ( Non- Shariah compliant Firms)

Mean VIF 1.15

Based on Table 4, the mean for VIF is 1.15, which is less than 10. This shows that

there is no multicollinearity problem existed.

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Both of the tests above clearly shows that there is no multicollinearity problem existed

in the analysis which means that all the independent variables use in the analysis is not

related to each other.

4.2 Descriptive Statistics

Table 3: Descriptive Statistics ( Shariah Compliant Firms)

Variable Mean Std. Dev Min. Max.

roa 0.8220782 0.6542875 0.102059 5.52634
arp 141.9545 225.9831 0.2694981 2888.683
itp 90.6988 189.493 -520.1053 1705.704
app 117.3567 426.1718 -242.5484 4896.498
cr 2.396574 2.208115 0.4456253 16.40813
dr 0.3763959 0.1674795 0.0010955 0.8849809
fs 1.74952 0.1272489 1.469085 2.08798
N=250 n=50 T=5

Table 5 shows the result of descriptive statistic of Malaysian Shariah compliant of

services and trading firms listed in Bursa Malaysia which included mean, standard

deviation, minimum and maximum value of dependent and independent variables. The

sample included 50 Shariah compliant of trading and services firms listed in Bursa

Malaysia for the year of 2010 to 2015.

Return on assets (ROA) which act as dependent variable indicates the profitability of

the firms records the mean as much as 0.8220. This means that Malaysian Shariah

compliant of services and trading firms listed in Bursa Malaysia for the year 2010 to

2015 generate an average return on asset as much as 82.20% with minimum

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profitability of 10.20% and maximum profitability of 500%. The standard deviation

recorded is

0.6542 indicates that the ROA can deviate from the average value of both sides by

65.42%.