Mohd Dali Nuradli Ridzwan Shah Bin, Mudasir Hamdi Hakeim and Abdul Hamid Suhaila
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…
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.