Performance and Firm Recovery Post Covid-19 Outbreak of Construction Sector: The Impact of Cash Flows Activities, Leverage and Liquidity

HRMARS - This study investigates the impact of cash flow activities, leverage, and liquidity on the performance and recovery of Malaysian construction firms in the post-Covid-19 period. Using a sample of 68 listed firms from 2021 to 2023, the analysis employs financial ratios such as return on assets (ROA) and return on equity (ROE) as performance indicators. The results indicate that leverage has a significant negative effect on firm profitability, while liquidity and cash flows from operating activities exert a positive and significant influence. Cash flows from investing and financing activities, however, show weak or insignificant relationships with firm performance. These findings suggest that construction firms with higher liquidity and stronger operational cash inflows were more resilient during the recovery phase, whereas reliance on debt financing weakened performance outcomes. The results are consistent with the Trade-off Theory, which emphasizes the balance between the benefits and costs of debt. This research contributes to the understanding of capital structure and financial management during crises by highlighting that optimal recovery is achieved through prudent leverage management and maintaining adequate liquidity reserves. Practical implications are offered for managers and policymakers to strengthen financial resilience in the construction sector against future shocks.