Determinants of Accounting-based Performance: Evidence from Bursa Malaysia

Abstract

This study aims to examine the determinants of accounting-based performance of 531 non-financial Malaysian listed companies over the period 2004 to2012. System generalized method of moments reveals that both prior risk-taking behaviour and size are found to be important determinants of performance. A significant positive influence of prior risk-taking behaviour on performance implies that risk-averse managers are cognitively influenced by their capability in handling risky investments in the past; consequently enhance confidence in their ability to manage profitable investments. The result appears to support the capital asset pricing model implication. Meanwhile, a significant positive size-performance relationship suggests that investors and fund managers should focus on larger companies as they can have better stock performance.

Keywords: Risk-Return Relationship; Reverse Size Effect; System-GMM