LIQUIDITY AND LEVERAGE: THE PERFORMANCE OF SHARIAH AND NON-SHARIAH COMPLIANT COMPANIES

Ratio analysis is the essential technique to learn about a company's financial health, strengths, and weaknesses. The Shariah Compliant Company (SCC) and Non-Shariah Compliant Company (NSCC) are developing very well in Malaysia. However, there have been several debates about the factors that contribute to the company's profitability that serve as a useful measure of its performance. This study aims to expand the knowledge regarding the performance of SCC and NSCC as determined by liquidity and leverage. Hence, 32 SCCs and 20 NSCCs in Bursa Malaysia were selected from the List of Shariah Compliant Securities by the Shariah Advisory Council of the Securities Commission Malaysia. The company’s quick ratio (QR) and debt ratio (DR) represent liquidity and leverage respectively, while performance is represented by return on assets (ROA) and return on equity (ROE) covering the years 2017 to 2022. This research discovered that SCC recorded greater performance than NSCC. A varying relationship exists between both dependent variable and independent variable depending on whether the company is SC or NSC. Liquidity significantly influences the performance of SCC especially based on ROA, while NSCC's performance is significantly influenced by leverage. SCC in Malaysia needs to focus more on its liquidity. As for NSCC, it shall prioritize the leverage utilized by the company. The findings of this research can be the future guidance for researchers, developing companies, and investors who want to explore more about the competitive landscape in Malaysia, particularly in the SC and NSC markets.