Capital investment and profitability across Malaysian consumer products sector

Abstract

Profitability is one of the key elements for survival in today’s highly competitive market. Capital investment is one of the most essential components that can facilitate a firm’s profitability. The objective of this study is to examine new evidences on the relationship of capital investment on firm’s profitability. This study employs the pooled ordinary least square regression (OLS) and fixed effect analysis across the time from 2010 until 2014 and 116 Malaysian consumer products from the manufacturing firms. Meanwhile, the empire building theory is discussed on the managers’ investing behavior. The pooled ordinary least square regression (OLS) results reflect that only two independent variables and control variables, namely: investment to asset, capital expenditure and firm size are significantly related to return on asset. In addition, the fixed effect analysis found that investment to asset and capital expenditures are significant to profitability. On the other hand, profitability trend analysis among consumer products firms across time shows strong trends in the sector.