Financial Goals Choices and Performance of Firms in Malaysia

Abstract

The objectives of the study are (a) to ascertain the financial goals pursued by companies in Malaysia (b) t0 find out the relationship between firms” financial performance and stated financial Data on the financial goals are collected from 41 KLSE listed firms through a questionnaire. analysis of the relationship between the financial goals pursued by these firms and their actual formance is conducted using dummy variables for financial goals. The results of the questionnaire analysis are: (a) Firms in Malaysia follow multiple financial (b) A very few firms consider maximization of market value per share as their primary goal the financial decision-making. (c) From the overall rank ordering of the financial goals, the wing four goals could be isolated as more important in practice: (i) maximization of operating it before interest and taxes (PBIT); (ii) maximizing the rate of return on equity (ROE); (ii) mizing the growth rate in earnings per share (EPS); and (iv) ensuring that funds are available. ‘The cross section study of the selected sample companies reveals that the pursuit of the goal of sizing PBIT is positively related to the accounting-based financial performance. However, ing the goal of maximizing ROE has no relationship with the actual performance measured ROE, and it has a negative relationship with the financial performance measure of ROA. The ial goals pursued by firms in Malaysia have no relation with market-to-book value as a sure of performance.