Examining the Firm-Specific Factors Influencing Systematic Risk of Transportation Firms in Malaysia and Singapore

Abstract

The objective of this study is to examine the effect of firm-specific variables on systematic risk in the transportation industry in Malaysia and Singapore for 20 years from 1997 to 2016. To determine the systematic risk, this study employs panel data analysis of Fixed Effect Model (FEM), Pooled Ordinary Least Square (POLS), and Random Effect Model (REM). Overall findings of both countries showed that financial leverage, profitability, and firm growth are insignificant
to systematic risk. However, Malaysia shows liquidity significantly and positively associated with systematic risk. Meanwhile, Singapore indicates a positive relationship with firm size. Moreover, by examining the impact of the financial crisis (2008) on systematic risk, this study found that the presence of the financial crisis does not influence the behaviour of systematic risk in the transportation industry in Malaysia and Singapore. The findings of this study contribute to the finance literature which may help to increase the current understanding about the nature of systematic risk of the firms, including the Shariah-compliant transportation firms in Malaysia. A good perception of the sources of risk may assist policymakers as well as firm managers to obtain new ideas against external issues such as systematic risk, and this may help firms to increase profitability and prevent them from a loss or bankruptcy cost. Moreover, the additional information about the financial crisis and systematic risk may help firm managers to be more prepared to handle systematic risk in a
normal as well as during crisis periods.